TMI Blog1989 (8) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... etime director. It was agreed when the purchase was made that the seventh petitioner would have the option to purchase the flat during the course of his employment or within 12 months thereafter. On September 14, 1978, an agreement was entered into between the company and the seventh petitioner giving him such option on payment by him of Rs. 100. On November 29, 1978, the seventh petitioner exercised the option. He then paid to the company a sum of Rs. 92,000, being half of the purchase price and requested that he be allowed to pay the balance in three equal instalments. The company's board of directors, thereupon, passed a resolution. It approved the transfer of the flat to the seventh petitioner on the basis that half of the purchase pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the loan amounted to an infringement of the provisions of section 295(1) of the Act making the petitioners liable to be proceeded against under section 295(4). The petitioners, through their advocates, contended in reply that the financial accommodation that was given by the company to the seventh petitioner in the form of deferred payment of the balance purchase price did not amount to a loan and, therefore, the provisions of section 295 were not attracted. On December 10, 1982, the Registrar of Companies filed a prosecution against the petitioners in the court of the Addditional of Metropolitan Magistrate at Bombay. He stated that the seventh petitioner had paid the sum of Rs. 92,000 on November 29, 1978, and the balance amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord English Dictionary as "a thing lent ; something the use of which is allowed for a time, on the understanding that it shall be returned or an equivalent given ; esp., a sum of money lent on these conditions and usually with interest." The concept of a loan has received judicial consideration in India. In Saradindu Sekhar v. Lalit Mohan Mazumdar, AIR 1941 Cal 538, purchase money was due to the plaintiff and the defendant had executed a bond in respect thereof. The defendant claimed relief under the Bengal Money Lenders Act. The court said, "leaving the purchase money unpaid is leaving a debt unpaid. Every loan is a debt but every debt is not a loan. The purchase money due to the plaintiff is a debt due to the plaintiff but is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderstanding that it shall be returned, and it may or may not carry interest. The debt here arose not out of an advance but out of the sale of the flat by the company to the seventh petitioner. The company gave to the seventh petitioner time to pay a part of the purchase price. The seventh petitioner was, thus, given financial accommodation by the company in the matter of payment of the debt. Such financial accommodation was not and did not amount to a loan. When section 295 refers to an indirect loan to a director, what it means is that the company shall not give a loan to a director through the agency of one or more intermediaries The word "indirectly" in the section cannot be rea3 as converting what is not a loan into a loan. This, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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