A
a company shall unless otherwise prescribed, make investment through not more
than two layers of investment companies.
The
provisions of this sub-section shall not affect,—
(i)
a company from acquiring any other company incorporated in a country outside
India if such other company has investment subsidiaries beyond two layers as
per the laws of such country;
(ii)
a subsidiary company from having any investment subsidiary for the purpose of
meeting the requirements under any law or under any rule or regulation framed
under any law for the time being in force.
No
company shall directly or indirectly —
(a)
give any loan to any person or other body corporate;
(b)
give any guarantee or provide security in connection with a loan to any other
body corporate or person; and
(c)
acquire by way of subscription, purchase or otherwise, the securities of any
other body corporate,
exceeding
sixty per cent of its paid-up share capital, free reserves and securities
premium account or one hundred per cent. of its free reserves and securities
premium account, whichever is more.
Where
the giving of any loan or guarantee or providing any security or the
acquisition exceeds the limits specified, prior approval by means of a special
resolution passed at a general meeting shall be necessary.
The
company shall disclose to the members in the financial statement the full
particulars of the loans given, investment made or guarantee given or security
provided and the purpose for which the loan or guarantee or security is
proposed to be utilised by the recipient of the loan or guarantee or security.
No
investment shall be made or loan or guarantee or security given by the company
unless the resolution sanctioning it is passed at a meeting of the Board with
the consent of all the directors present at the meeting and the prior approval
of the public financial institution concerned where any term loan is subsisting,
is obtained.
Prior
approval of a public financial institution shall not be required where the
aggregate of the loans and investments so far made, the amount for which
guarantee or security so far provided to or in all other bodies corporate,
along with the investments, loans, guarantee or security proposed to be made or
given does not exceed the limit as specified in sub-section (2), and there is
no default in repayment of loan instalments or payment of interest thereon as
per the terms and conditions of such loan to the public financial institution.
No
company, which is registered under section 12 of the Securities and Exchange
Board of India Act, 1992 and covered under such class or classes of companies
as may be prescribed, shall take inter-corporate loan or deposits exceeding the
prescribed limit and such company shall furnish in its financial statement the
details of the loan or deposits.
No
loan shall be given under this section at a rate of interest lower than the
prevailing yield of one year, three year, five year or ten year Government
Security closest to the tenor of the loan.
No
company which is in default in the repayment of any deposits accepted before or
after the commencement of this Act or in payment of interest thereon, shall
give any loan or give any guarantee or provide any security or make an
acquisition till such default is subsisting.
Every
company giving loan or giving a guarantee or providing security or making an
acquisition under this section shall keep a register which shall contain
particulars as may be prescribed.
The
register shall be kept at the registered office of the company and —
(a)
shall be open to inspection at such office; and
(b)
extracts may be taken there from by any member, and copies thereof may be
furnished to any member of the company on payment of such fees as may be
prescribed.
This
Section, except sub – section (1), shall not apply –
(a)
to a loan made, guarantee given or security provided by a banking company or an
insurance company or a housing finance company in the ordinary course of its
business or a company engaged in the business of financing of companies or of
providing infrastructural facilities;
(b)
to any acquisition –
1.
made
by a non – banking finance company whose principal business is acquisition of
securities in respect of investing and lending activities;
2.
made
by a company whose principal business is the acquisition of securities;
3.
of
shares allotted in further issue of capital;
If
a company contravenes the provisions of this section, the company shall be
punishable with fine which shall not be less than twenty-five thousand rupees
but which may extend to five lakh rupees and every officer of the company who
is in default shall be punishable with imprisonment for a term which may extend
to two years and with fine which shall not be less than twenty-five thousand
rupees but which may extend to one lakh rupees.
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