Scdl - Pgdba - Finance - Sem 4 - Legal Aspects Of Finance

PART - I Q.1

Explain the deductions which are authorized under the payment of wages Act, 1936.

Ans

DEDUCTIONS FROM WAGES

According to section 7(1) every payment made by the employed person to the employer or his agent shall be deemed to be a deduction from wages. Deductions authorized as per section 7(2) can be made from the wages. The list of the deduction are as under – a) Fines b) Deduction for absence from duty c) Deduction for damage to or loss of goods or loss of money d) Deduction for house accommodation e) Deduction for the amenities and services f) Deduction for recovery of advances g) Deduction for recovery of loans h) Deduction for income tax i) Deduction under the order of a Court of authority j) Deduction in respect of provident fund k) Deduction for payment to company-operative societies. l) Deduction for payment to a Scheme of Insurance of a Post office m) Deduction for payment of Life Insurance Premium. n) Deduction for the purchase of Government Securities. o) Deduction for payment to post office saving bank. p) Deduction for payment of contribution to certain funds. q) Deduction for payment of certain fees r) Deduction in respect of fidelity guarantee bond. s) Deduction for certain losses incase of railway administration t) Deductions for payment to Prime Minister’s National relief fund or any other fund u) Deductions for contribution to insurance scheme. The total amount of all categories of deduction from the wages of any employed person, in any wage period, should not exceed the following limits prescribed by section 7(3). 1) 75% of the wages payable in case where such deductions are wholly or partly made for payments to company-operative societies under section 7(2)(i) of the Act. 2) 50% of the wages payable in any other caseprovided that where the total deductions authorized exceed 75% or as the case may be, 50% of the wages the excess may be recovered in such manner as may be prescribed. Brief discussion on the above list of deductions are as under:a) Fines – Deductions by way of fine from the wages of an employed person shall be made only in accordance the provision of the Act. Section 8 lays down the general requirements for imposition and deduction of fine. The total amount of fine which may be imposed in any wage period on any employed person shall not exceed an amount equal to three percent of the wages payable to him in respect of the wage period. No fine shall be imposed on any employed person who is under the age of fifteen years. No fine imposed on any person shall be recovered from him by installments or after the expiry if sixty days from the day on which it was imposed. Every fine shall be deemed to have been imposed on the day of the act or omission in respect of which it was imposed. All realizations of fines shall be applied only to such purposes beneficial to the persons employed in the factory or establishments as are approved by the prescribed authority. b) Deduction for absence from duty – Section 9 of the Act lays down that any such deductions may be made on account of the absence of employed person from the place or places where, by the

c)

d)

e) f) g) h) i)

j) k)

l)

terms of the employment, he is required to work. It is further provided that such absence may be for the whole or any part of the period during which he is so required to work. An employed person shall be deemed to be absent from the place where he required to work if, although present in such place, he refuses to carry out his work in pursuance of stay in strike or for any other cause which is not reasonable in the circumstances. The amount of such deductions must bear to his wages the same proportion as his absence bears to the total within the wage period during which he was by the terms of his employment required to work. Deductions for damages to or loss of goods or loss of money – Clause (C) of security 7 (2) authorizes deduction for damage to or loss of goods expressly entrusted to the employed persons for custody or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default. Deduction for house accommodation supplied by the employer or by Government or any housing board set up under any law for the time being in force (whether the Government or the board is the employer or not) or any other authority engaged in the business of subsidizing house accommodation which may be specified in this behalf by the state government by notification in the official gazette. Deduction for the amenities and services supplied by the employer as the State Government or any officer specified by it in this behalf may be general or special order, authorize. Deductions for recovery of advances of whatever nature (including advances for travelling allowance or conveyance allowance) and the interest due in respect thereof, or for adjustment of over payments of wages. Deduction for recovery of loans made from any fund constituted for the welfare of labour in accordance with the rules approved by the State Government, and the interest due in respect thereof. Deduction for income tax payable by the employed person is permissible. It is the duty of the employer to deduct the income tax payable by the employee, subject to certain exceptions, and deposit the same in the account of the Government. Deductions from wages can be made under the order of a Court or other Authority competent to make such order. The authority referred here is the Statutory Authority, authorized by some statutory provisions. Thus, a Private Roadways co. is not competent authority to make order for the deductions of wages. Every employer is not authority, even where an employee agrees to the deductions to be made by the employer, the employer does not become an authority and therefore would not get benefit of this provision. Deductions in respect of provident fund- an employed person may contribute to a scheme of provident fund. He may also be granted advance form such provident fund. Deductions for payment to co-operative societies – Deductions for any payment to Co-operative societies is allowed under following conditions given in section 7 (2) (j) read with section 13. 1. the cooperative society is approved by the State Government or any official specified by it in this behalf. 2. this deductions are in conformity with rules laid down by the State Government in this respect.

Deductions for payments to a scheme of insurance maintained by the Indian post office, is allowed under Section 7(2) (j), provided deductions are made subject to such conditions as the State Government may impose under section 13. m) Deductions can be made for payment of any premium to the life insurance corporation of India, on the life insurance policy of the employed person. But the deduction is subject to following conditions i) It shall be made only after obtaining written authorization of the employed person. ii) If the state Government has imposed any condition, no conditions can be made unless these conditions are complied with (section 13). n) Deductions are allowed for the purchase of securities of: i) The Government of India, or ii) Any state Government

o) Section 7(2) authorizes deduction for being deposited in any post office saving bank in furtherance of any savings scheme of central or any State Government. p) Deductions for payment of contribution to certain funds – Deductions can be made with the written authorization of the employed person, for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Union Act, 1926 for the welfare of the employed persons or the members of their families or both, and approved by the State Government or any officer specified by it in this behalf, during the continuance of such approval. q) Deductions for payment of certain fees – Deductions can be made, with the written authorization of the employed person, for payment of the fees payable by him for membership of any trade union registered under the Trade Union Act, 1926. r) Deductions in respect of Fidelity Guaranteed Bond – Any payment of Insurance premium of fidelity Guarantee Bond can be deducted from the wages of an employed person. s) Deductions can be made from the wages of a person employed in a railway administration for the recovery of losses sustained by a railway administration. t) Deductions can be made with the written authorization of the employed person, for contribution to the Prime Minister’s National Relief Fund or to such other fund as the Central Government may, by notification in the official gazette, specify. u) Deductions for contributions to Insurance scheme – Deductions can be made for contributions to any insurance scheme framed by the Central Government by the benefit of its employees.

Q.2 Define an “Accident” as given in the workmen’s Compensation Act, 1923. When it is said to arise out of and in the course of an employment? Ans ACCIDENT The word Accident has not been defined in the Act. It means any unexpected mishap, untoward event or consequences brought about by an unanticipated act which could not be provided against. Whether particular occurrence is accident or not it must be looked upon not only from the point of view of the person who cause it but also from the point of view of the person who suffers it. ARISING OUT OF AND IN THE COURSE OF EMPLOYMENT: The expression “arising out of “ suggests the cause of accident and the expression “in the course of” points out to the place and circumstances under which the accident takes place and the time when it occurred. A Casual connection between the injury by accident and the employment is necessary. The direct connection between the injury caused by an accident and the employment of the workman is always not essential. The words arising out of employment are understood to mean that during the course of the employment injury has resulted from some risk incidental to the duties of the service which unless engaged in the duty owing to the master it is reasonable to believe the workman would not otherwise have suffered. The employee mush show that he was at the time of injury engaged in the employer’s business or in furthering that business and was not doing something for his own benefit. In the course of employment refers to the period of the employment and the place of work it is neither limited to the period of actual labour not includes acts necessitated by the workman’s employment. The employee mush show that he was doing something in discharge of a duty to his employer directly or indirectly imposed upon him by his contract of service. In State of Rajasthan V Ram Prasad and another the workman died due to natural lightening while working at the site. It was held by the Supreme Court that in order that workman may succeed in his claim for compensation, it is no doubt true that the accident must have casual connection with the employment and arise out of it but if the workman is injured as a result of natural force of lightening

though it in itself has no connection with employment of deceased Smt. Gita, the employer can still be held liable if the claimant shows that the employment exposed the deceased to such injury. In the present case the deceased was working on the site and would not have been exposed to such hazard of lightening had she not been working so. Therefore the appellant was held liable to pay compensation.

Q.5. a) Gratuity when becomes payable? b) Who are entitled for payment of Gratuity? Ans a) When is Gratuity payable? : By Virtue of Section 4(1), Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five yearsi) On his superannuation or ii) On his retirement or resignation or iii) On his death or disablement due to accident or disease It has been provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement. b) Who are entitled for payment of Gratuity? It is payable to the employee himself but in the case of the death of the employee, gratuity payable to him shall be paid to his nominee or if no nomination has been made, to his heirs and where any such nominees or heirs is a minor, same for the benefit of such minor in such bank or other financial institution, as may be prescribed until such minor attains majority.

Q.4 What is procedure for determination and recovery of dues from employer under the employee’s provident fund and miscellaneous provision act? Ans MODE OF RECOVERY OF MONEY’S DUE FROM EMPLOYERS To invoke section 8 of the Act, the employer must be under a legal liability to transfer the assets. An amount due may, if the amount is in arrear, be recovered in the manner specified in Section 8-B to 8G. Recovery may be made from the employer in relation to an establishment to which any scheme or, the Insurance scheme applies of any amount lying in arrear in respect of the following: 1) Any contribution payable to the fund or as the case may be, the Insurance Fund; or 2) Accumulations in any provident fund standing to the credit of the employees who become members of the Fund or, as the case may be the Insurance fund established under the Scheme or, the Insurance Scheme; or 3) Accumulations to the credit of an employee exempted under section 17(1), 17(1-A) and 17(2) of the Act; or 4) Damages recoverable under Section 14-B; i.e., for default in the payment of any contribution to the fund, family pension fund or the insurance fund or in the transfer of accumulation in any provident fund or in the transfer of accumulations to the credit of an employee exempted under section 17(1), 17(1-A) and 17(2) of the Act; or

5) Damages recoverable under section 14-B for default in the payment of any charges payable under other provision of this Act or the scheme or the Insurance Scheme or under any of the conditions specified under section 17 of the Act. 6) Any charges payable by the employer under any other provisions of the Act or scheme or the Insurance Scheme. Similarly recovery may also be made, in the manner specified in Section 8-B to 8-G from an employer in relation to an exempted establishment, of any amount remaining in arrear in respect of the following: 1) Damages recoverable under section14-B, as stated above in paras 4 and 5 of this section. 2) Any charges payable by the employer to the Appropriate Government under any provisions of this Act or under any of the conditions specified under section 17 or in respect of the contribution payable by him towards the Family Pension Scheme under the said Section 17. But for the collection of any arrears the Provident Fund Commissioner must send the recovery certificate to the collector of the district or the place where his office is situated. The collector and not the Provident Fund Commissioner shall send the recovery certificate to the collector of another district. In a proceeding to recover the employer’s contribution, the property of the employer attached by the court, subject only to the burden of the entire mortgage held by the Bank, notwithstanding the fact that the demand in respect of the employer’s contribution amount of the employer’s contribution has not been determined, no proceedings for recovery can be taken under this section.

Q.6. What are the different kinds of benefits provided under the employee’s State Insurance Act, 1948, discuss in brief. Ans BENEFITS Section 46 lays down the following benefits admissible to the insured persons on their dependents on other persons as mentioned. a) Sickness benefits – b) Maternity benefits – c) Disablement benefits – d) Dependents benefits – e) Medical benefits – f) Funeral Expenses – Brief discussions on above benefits are as under: a) Sickness Benefit: In terms of section 46(1)(a) Sickness benefits include, periodical payment to any insured person in case of his sickness certified by a duly appointed medical petitioner or any person possessing prescribed qualifications, the sickness benefits shall be admissible at the rate specified in the Schedule, but he shall not be entitled to the benefit for the first two days of sickness. In the case of a spell of sickness following at an interval of not more than 15 days, the spell of sickness benefit was last paid. The sickness benefit shall not be paid to any person for more than 91 days in any two consecutive benefits periods. b) Maternity Benefit: In terms of Section 46(1) (b), it includes periodical payment to an insured woman in case of confinement or miscarriage or sickness arising out of pregnancy, confinement, premature birth of child or miscarriage. Such women will be certified to be eligible for such payment by an authority specified in this behalf by the regulations.

c) Disablement Benefit: Sec 46 (1) (c) includes periodical payment to an insured person suffering from disablement as a result of an employment injury, sustained as an employee under this act and certified to be eligible for such payments by an authority specified in this behalf by the regulations. A person shall be qualified to claim benefits for temporary disablement for not less than 3 days (excluding the day of accident) for the period of such disablement sustained as an employee under the act. A person shall be qualified to claim periodical payment for permanent disablement sustained as an employee under the Act, whether total or partial for such disablement. Sec 51, 51 A, 51 B, 51 C, 51 D and 52 A deal with the disablement benefits. d) Dependent Benefits: In terms of Sec 46 (1)(d), it includes periodical payments to such dependent of an insured person who dies as a result of an employment injury sustained as an employee under this act. Section 52 provides for the payment of these benefit to the dependent of the deceased person, if an insured person dies as a result of an employment injury, sustained as an employee under this act. e) Medical Benefits: In terms of Sec 46(1)(e), it includes medical treatment for insured person or his dependents. Sec 56 provides that an insure person or a member of his family, whose conditions requires medical treatment and attendance shall be entitled to receive medical benefits. Such medical benefit may be given either in the form of out patient treatment and attendance in a hospital or dispensary, clinic or other institutions or by visits to home of the insure person or treatment as in-patient in hospital or other institutions. f) Funeral Expenses: Sec 46(1)(f) provides for funeral benefits to the eldest surviving member of the family of an insured person, who had died, towards the expenditure on the funeral of the diseased insured person or where the insured person did not have a family or was not living with his family at the time of his death to the person who actually incurs the expenditure on the funeral of the diseased insured person, provided that the amount of such payments shall not exceed Rs. 2500 and the claim for such payment shall be made within three months of death of the insured person or with such extended period as the corporation or any officer, or authority authorized by it in this behalf may allow.

PART – II Q.1.

What is the procedure for the incorporation of the company?

Ans STEPS FOR INFORPORATION OF THE COMPANY In order to register a company under Indian Companies Act the promoter of a company has to make an application for availability of name by suggesting four names. The name should indicate the activity of the company and has to mention the main object to be pursued by the company on its incorporation. The applicant has to give the names of two subscribers in case of private companies and names of seven subscribers in public companies. In the application form the proposed authorized capital in case of Private company should be minimum rupees one lakh and in case of Public company it should be minimum rupees five lakh. The application for availability of name should be in a Form 1A. Once registrar of companies approves the name the papers for incorporation of company should be filed within six months for the date of issue of letter. 1) The promoters of the company have to prepare Memorandum of Association and Articles of association of the company. In the memorandum of Association of the company the object clauses of the company are divided into three categories; a) Main object to be pursued by the company on its incorporation b) Object incidental or ancillary to the attainment of main object c) Other objects In the MOA the company has to state that the liability of the members is limited and has to mention the Authorised capita of the company and the division of the Authorised capital. The MOA spells out the activities, which the company is Authorised, to do and the company cannot start any activity, which is outside the scope of MOA. 2) ARTICLES OF ASSOCIATION (AOA) The AOA of the company spells out the rules for the internal management of the company such as shares, transfer of shares, board of Directors, procedure for Board meeting, borrowing powers of the company, meetings of the shareholders and procedure for holding the meeting of shareholders and the board. 3) At the time incorporation of the company the promoter of the company has to submit two printed copies of MOA and AOA duly signed and stamped by the subscribers along with Form 1, 18, 32 and 29 in case of public company.

Q.2 What are the requirements for holding Annual General Meeting and Extra Ordinary Annual General Meeting? Ans Annual General Meeting: Every company has to hold in each year a general meeting called Annual General Meeting of the shareholders in addition to other meetings. There should not be a gap of more than 15 months between two Annual General Meeting and the Annual General Meeting must be convened on a working day and during the business hours of the company. It should be held within 6 months from the closure of the financial year. The first Annual General Meeting of the company should be held within 18 months from the date of incorporation of the company and within 9 months from the closure of the financial year.

Annual General Meeting is considered for transacting the following ordinary business: a. To receive, consider and adopt the accounts of the company and the directors report and auditors report theron. b. Declaration of dividend if any. c. Re-appointment of directors retiring by rotation. d. Appointment of auditor and to fix their remuneration. Any other business to be transacted at the Annual General Meeting is called a special business and the company has to give explanatory statement for passing special business. Annual General Meeting should be held within the city, town or village where the registered office of the company is situated and should be held within municipal limit or postal limit whichever is greater. If default is made in holding a Annual General Meeting the company and every officer of the company who is in default shall be punishable with a fine, which may extend to Rs. 50,000 and in case of continuing default with a further fine which may extend to Rs. 2,500 for every day after the first during which such default continues. Extra Ordinary Annual General Meeting: Any general meeting other than the Annual General Meeting is called as the Extra Ordinary Annual General Meeting. When approval of shareholders is required for certain business that cannot be kept pending till the date of the ensuing Annual General Meeting. An Extra Ordinary Annual General Meeting is convened the businesses transacted at the Extra Ordinary Annual General Meeting are generally special businesses and the resolutions to be passed are either special or ordinary resolution. Extra Ordinary Annual General Meeting can be held at any place and not like the Annual General Meeting that can be held only at the place where the registered office of the company is situated. The Directors on their own or on requisition from the shareholders can convened Extra Ordinary Annual General Meeting. If the company has received a requisition from the shareholders for calling Extra Ordinary Annual General Meeting to transact certain business, the Board of Directors of the company has to convene the meeting for transacting the business as per the requisition within twenty-one days from the date of requisition. If the Board of Directors fails to convene the Extra Ordinary Annual General Meeting within forty-five days from the date of requisition and are entitled to be reimbursed the expenses incurred for calling Extra Ordinary Annual General Meeting.

Q.7 What are the committees required to be formed under Corporate Governance and their functions? Ans 1. Audit Committee: Every company shall have a qualified and independent audit committee and shall comply the following: a) The Audit committee shall have minimum three members and all the members shall be nonexecutive director with the majority of them being independent. b) All the members of the audit committee shall be financially literate and atleast one member shall have accounting or related financial management expertise. The financially literate means ability to read and understand basic financial statement i.e. balance sheet, profit and loss account and cash flow statement.

A member shall be considered to have accounting or related financial management expertise if he or she possesses experience in finance or accounting, or requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. c) The chairman of the committee shall be an independent director. d) The chairman shall be present at Annual General Meeting to answer shareholder queries. e) The audit committee should invite such of the executives, as it considers appropriate to be present at the meetings of the committee, but on occasions it may also meet without the presence of any executives of the company. f) The company secretary shall be the secretary of the committee. ROLE OF AUDIT COMMITTEE: a) Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. b) Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for any other services. c) Reviewing with management the annual financial statements before submission to the board, focusing primarily on; i. Any changes in accounting policies and practices. ii. Major accounting entries based on exercise of judgment by management. iii. Qualification in draft audit report. iv. Significant adjustments arising out of audit. v. The going concern assumption. vi. Compliance with accounting standards. vii. Compliance with stock exchange and legal requirements concerning financial statements. viii. Any related party transactions. d) Reviewing with the management, external and internal auditors, the adequacy of internal control systems. e) Reviewing the adequacy of internal audit function, including the structure jof the internal audit department, staffing and ip; olikkiosleniority of the official heading the department, reporting structure coverage and frequency of internal audit. f) Discussion with internal auditors any significant findings and follow up thereon. g) Reviewing the findings of any internal investigations by the internal auditors in to matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board. h) Discussion with external auditors before the audit commences about nature and scope of audit as well as post-audit discussion to ascertain any area of concern. i) Reviewing the company’s financial and risk management policies. j) To look in to the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders and creditors. 2. Shareholders Committee: Name of non-executive director heading the committee. Name and designation of compliance officer. Number of shareholders complaints received so far. Number not solved to the satisfaction of shareholders. Number of pending share transfers. 3. Remuneration Committee: Brief description of terms of reference

Composition, name of members and Chairperson Attendance during the year. Remuneration policy. Details of remuneration to all the directors as per format in main report.

Q.6 Whether charge is to be registered with the Registrar of Companies of loan granted to the company? And if the charge is not registered, what is the position of the lender? Ans REGISTRATION OF CHARGES Every company taking loan from the banks or financial institutions has to create a charge on the assets of the company in favour of the banks or the lending institute. The necessary Form 8 & 13 for creation of charge along with the certified copy of the charged document i.e. Hypothecation Deed or Term Loan Agreement should be signed by both the company and the chargeholder/lender and filed with Registrar of Companies. The form should be filed within 30 days from the date of execution of the document with registrar of companies. However with additional fees the Registrar of Companies has power to accept the Form within further period of 30 days. This forms 8 & 13 should be filed in triplicate. After receipt of this form the Registrar of Companies take on record and register the charges and return 2 (two) copies of the same form one for the company and other for the chargeholder. If there is any delay in filing Form 8 & 13 beyond 60 days from the execution of domument for creation of charge, the company has to make a petition to the company law board for condonation of delay. Usually when a Form is filed by the company with Registrar of companies after 60 ddays from the date jof execution of the document the Registrar of companies issues a notice to the company requesting to make a petition to the company law board for condonation of delay in filing the form. The company law board after hearing the petiton passes an order in regard to condonation of delay.

Q.5 Who can apply to the High Court for oppression and mismanagement of the company and what steps he has to take before filing petition before the High Court? Ans Application to Company law Board for relief in cases of oppression: Any member of the company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in any manner oppressive to any member or members may apply to the company law board for an order provided such members have right to apply. If on any application the company law board is of the opinion a) that the company’s affairs are being conducted in a manner prejudicial to public interest or in any manner oppressive to any member or members; and b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just

and equitable that the company should be wound up; the company law board may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. Application to company law board for relief in cases of mismanagement: 1) Any members of a company who complain: a) that the company’s affairs are being conducted in a manner prejudicial to public interest or in any manner prejudicial to the interests of the company; or b) that a material change not being a change brought about by or in the interests of any creditors including debentureholders or any shareholders of the company has taken place in t he management or control of the company whether by an alteration in its Board of Directors or in the ownership of the company’s shares, or if it has no share capital, in its membership, or in any other manner and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in any manner prejudicial to the interests of the company ; may apply to the company law board for an order. 2) If on any application the company law board is of the opinion that the affairs of the company are being conducted as aforesaid any, with a view to bringing to an end or preventing the matters complained of, make such order as it thinks fit. Right to apply A member of the company shall have right to apply to the company law board for oppression and mismanagement of the company provided application is made by members not less than 100 or by the members holding not les than one tenth of the total number of share in the share capital of the company and in the case fof a company not having share capital not less than one tenth of the total number of its member and the application can be made by any one or more of its members having obtained consent in writing of the rest to make an application on their behalf and for their benefit. On the receipt of application the company law board hears both the companies as well as petitioner and gives the suitable order to the company on the issue of oppression and mismanagement of the company. In the case of urgency the company law board passes an interim order before passing final order for regularizing the conduct of the company’s affairs upon such terms and conditions. The Central Government may appoint such number of persons as the company law board may by order in writing specify as be necessary to effectively safeguard the interest of the company or its shareholders or the public interest to hold office as directors thereof for such period not exceeding 3 years on any occasion as it may think fit.

Q.3 What are the limits for inter-corporate investments and loans and upto what extent board has power to make investments and grant loans? Ans Inter-Corporate Investments And Loans No company shall, directly or indirectly; a) make any loan to any other body corporate b) give any guarantee, or provide security, in connection with a loan made by any other person to, or to any other person, by any body corporate and

c) acquire by way of subscription, purchase or otherwise the securities of any other body corporate, exceeding sixty percent of its paid-up share capital and free reserves, or hundred percent of it’s free reserves, whichever is more. Provided that where the aggregate of the loans and investments so far made, the amounts for which guarantee or security so far provided to or in all other bodies corporate, along with the investment, loan, guarantee or security proposed to be made or given by the board, exceeds the aforesaid limits, no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorized by a special resolution passed in a general meeting. No loan or investment shall be made or guarantee given by the company unless the resolution is passed at the meeting by the board with the consent of all the directors present at the meeting and if there is any term loan subsisting with the prior approval of the financial institution. The loan to any body corporate shall be made at the rate of interest not less than that prevailing bank rate as may be prescribed by the Reserve Bank of India from time to time. If the company has made default for the payment of interest or repayment of deposit to the deposit holder then it cannot give loan to anybody corporate or give guarantee or provide security to any person or to make investment in the shares of any other company. Every company shall keep a register showing the following particulars in respect of every investment or loan made, guarantee given or security provided.