Section 186:- This section enlists the exceptions and specifies the limits up to which a company can give loan.
The section 185 of CA, 2013, restrict the company on giving loans, guarantee or provide security to Directors or any other person in whom Director is interested.
EXCEPTION TO SECTION 185
a) As a part of service extended to all of its employee.
b) Any Scheme Approved by members by special resolution.
In Case any amount is outstanding on 12th September as a loan to Director or anyone in whom Director is interested.
A. The loan can still continue to appear in the books of accounts of Company; however it can’t be renewed and is to be repaid on the end of the term. If it’s a loan repayable on demand then still it is suggested to make a formal agreement with tenure specified in it.
The above explanation gives a brief picture about the referred section in this regard.
Now as far as recovery under sarfesi act is concerned
in terms of sub-section (3) of Section 13, the notice shall also give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor. Banks should ensure that drawings in the working capital accounts are covered by the adequacy of current assets, since current assets are first appropriated in times of distress. It is mandatory by the Banks to follow the RBI guidelines on asset classification before any account can be classified as an NPA and any irregularity in this regard can be fatal and can nullify the proceedings initiated under the SARFAESI Act. Further RBI keeps updating or modifying the guidelines governing asset classification.
A borrower / guarantor aggrieved by the action of the Bank can file an appeal with DRT and then with DRAT, but not with any civil court. The borrower / guarantor has to deposit 50% of the dues before an appeal with DRAT.
If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the following measures:
Take possession of the security
Sale or lease or assign the right over the security
Manage the same or appoint any person to manage the same.
The Sarfaesi act covers any asset, movable or immovable, given as security whether by way of mortgage, hypothecation or creation of a security interest. There are some exceptions in the act such as personal belongings. However, only that property given as security can be proceeded under the provisions of SARFAESI Act. If the property of the borrower is his own mortgaged residential house, it is also NOT exempted from the Sarfaesi act.