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borrowing powers


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borrowing powers

  1. 1. Borrowing Powers Page 1 Assignment - 5 Company Law Date of Submission: 16 September,2015 Submitted by: Sonali Class: BBA Roll No: BBA/13/913
  2. 2. Borrowing Powers Page 2 1 Explain the borrowing powers of a company? When can a company lawfully borrow money? What are the restrictions on borrowing powers of a company? Every trading company has an implied power to borrow, as borrowing is implied in the object for which it is incorporated. A trading company can exercise this power even if it is not included in the Memorandum. However non-trading company has no implied power to borrow and such power can be taken by it implied power to borrow and such power can be taken by it by including a clause to that effect in the Memorandum. Definition The ability to borrow more funds. A person or company with a great deal in assets and little in debt is likely to have greater borrowing power than a person or company in the opposite position. Restrictions on borrowing power • A public company can borrow only after the receipt of Commencement Certificate. [Section 149(1)]. But a • Private company can borrow immediately after the incorporation The Board of Directors may borrow moneys by passing a resolution passed at the meetings of the Board. The board may delegate its borrowing powers to a Committee of Directors. Such a resolution should specifically mention the aggregate amount upto which the moneys can be borrowed by the Committee, the Managing Director, Manager or any other principal officer of the company on such conditions as it may prescribe [Section 292 (1) (c)]  The moneys borrowed together with the moneys already borrowed by the company (excluding loans obtained from banks i.e. working capital) shall not exceed the aggregate of the paid up capital and the free reserves. [Section 293(1)(d)]  It may be noted that a company may borrow in excess of its paid up capital and free reserves if it is so consented and authorized by the shareholders at a general meeting.  Transactions, which are not borrowing  Temporary loans (repayable within six months or on demand) obtained from the company’s banker in the ordinary course of business.  Borrowing of money by a banking company in the ordinary course of business.  Hire purchase and leasing transactions.  Purchase of machinery on deferred payment.
  3. 3. Borrowing Powers Page 3 Ultra Vires Borrowing • A Company is said to resort to ultra vires borrowing if it exceeds the authority given to it in this respect by the Companies Act, the Memorandum and the Articles of the company. An act of borrowing by the company may be ultra vires (outside the power of) the company or ultra vires the directors or ultra vires the Articles. • Void ab initio borrowings - Where such loan is ultra vires the company, such loan is null and void and does not create an actionable debt. Any securities given in respect thereof are inoperative. Thus, the lender cannot sue the company for the return of the loan and shall be under an obligation to return back the securities, if any. However, if the lender has acted in good faith that is without any knowledge that the company borrowed the money beyond its powers, he may have the following remedies 1. Injunction- If the company has not spent the money so borrowed, the lender may obtain an injunction order against the company restraining it from spending the amount and recover the same. 2. Restitution- If the money has been invested in some particular asset, he may claim that asset, or if such asset cannot be ascertained he may claim that any increase in the assets as a result of such borrowing be restored to him in the even of a winding up. 3. Subrogation- If the money has been applied in paying off some debts of the company, he is entitled to step into the shoes of the creditors so paid off and can rank as a creditor of the company to the extent of the money so applied. 4. Suit for breach of warranty- The lender may sue the directors personally for breach of implied warranty of authority and claim damages for the same. 5. Ratification of borrowing- If the borrowing power exercised by the company is ultra vires the Memorandum, that is beyond the powers given to its by the Memorandum, such borrowing cannot be ratified afterwards in any way, even by a unanimous resolution of the shareholders in a general meeting.
  4. 4. Borrowing Powers Page 4 But if the borrowing is ultra vires the Articles, but intra views the Memorandum the act of borrowing can be ratified by the shareholders in general meeting by altering the Articles or by passing a resolution as per Articles. If the borrowing is ultra vires the directors but intra vires the Memorandum, that is within the powers given by the Memorandum but beyond the authority of the directos, the company in general meeting may ratify such act of the directors. In that case the debt will be valid and binding on the company. BORROWINGS & CHARGES Even if the borrowing is not ratified by the company, the lender in good faith will be protected since the directors in borrowing the money had acted as agent of the company. However in that case the directors will be liable to indemnify the company against the loss incurred thereby. • Even in the case of unauthorized borrowings, the company will be liable to repay, I it is shown that the money had gone into company’s pocket [Lakshmi Ratan Cotton Mills Co. Ltd v. J K Jute Mills Co; Ltd (1957) 27 Comp. Cas. 660 (All).] CHARGES • Borrowing has become an equally important method along with share capital of financing projects. Corporate borrowing has its own peculiarities. No single individual may in normal circumstances be in a position to meet the loan requirements of a company. Loan-money has, therefore, to be raised from a large number of individuals very much in the same way as share capital. Loans may have to be obtained in a sequence one after the other. • The problem was solved by the evolution, on the one hand, of debentures and, on the other, of the concept of floating charge, both being reserved only for the corporate sector. The same assets are charged to several lenders and also to several lenders in a series. That raises a question as to who shall have priority. This gave rise to the concept of pari passu ranking. Since other trade creditors have also to seek payment only out of the company's assets, the problem had to be tackled as to how they should know, before supplying more credit, what assets would be available as security for their payments? • The Act prescribes for registration of charges with the Registrar of Companies, and also gives a list of assets a charge on which must be registered. Registration of charges identifies the assets, which are subject to the charge. It becomes a source of knowledge, and, therefore, operates as constructive notice and a protection, to "all classes of persons interested in knowing the assets position of the company. It makes the charge effective against all quarters including the liquidator.
  5. 5. Borrowing Powers Page 5 Types of charges 1. Fixed charge - a charge is fixed when it is made specifically to cover definite an ascertained assets of permanent nature such as land, building, o heavy machinery. A fixed charge passes legal title to certain specific assets and the company loses the right to dispose of the property unencumbered, though the company retains possession of the property. 2. Floating charge – it is a charge on the current assets of the company, present or future which changes from time to time in the ordinary course of business e.g. stock in trade, bills receivable, cash in hand, work in progress, goods in transit, inventory etc. (i) When the company goes into liquidation; (ii) When the company ceases to carry on the business; (iii) When the creditors or the debenture holders take steps to enforce this security e.g. by appointing receiver to take possession of the property charged; (iv) On the happening of the even specified in the deed. Registration of charges[Section 125] • The security created and charged for the following purposes must be registered with the ROC within 30 days (or further period of 30 days with additional fees) after the date of their creation: (i) Securing any issue of debentures; (ii) Uncalled share capital of the company; (iii) Any immovable property; (iv) Book debts, stock in trade or other current assets of the company; (v) Any movable property (not being a pledge); (vi) Calls made but not paid; (vii) IPRs of the company. • The ROC shall with respect to each company maintain a Register of charges containing all the specified particulars. Upon registration of charge by the company, ROC shall issue a Certificate of charges, which shall be conclusive evidence.
  6. 6. Borrowing Powers Page 6 Memorandum of satisfaction[Section 138-140] • On payment or satisfaction of any charge in full, the company must notify the fact to the ROC within 30 days from the date of such payment or satisfaction. The ROC shall on receipt thereof, shall record the same after send due notice to the concerned creditor and on receipt on him being satisfied (the creditor may issue NOC to the satisfaction) shall register the satisfaction of the charge. A memorandum of satisfaction shall be entered in the Register by the ROC. The Central Government has been empowered to extend time for registration of charge or satisfaction of charge of issue of debenture of a series and to order that the omission or mis-statement in the Register of Charges be rectified.
  7. 7. Borrowing Powers Page 7 2 What are the provisions of companies act respect of registration & satisfaction of charges? In exercise of the powers conferred under sections 77, 78, 79, 81, 82, 83, 84, 85, 87 read with section 469 of the Companies Act, 2013 (18 of 2013) and in supersession of the Companies (Central Government’s) General Rules and Forms, 1956 or any other relevant rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules, except as respects things done or omitted to be done before such supersession, the Central Government hereby makes the following rules, namely: – 1. Short title and commencement.- (1) These rules may be called the Companies (Registration of Charges) Rules, 2014. (2) They shall come into force on the date of their publication in the Official Gazette. 2. Definitions.- (1) In these rules, unless the context otherwise requires,- (a) ‘‘Act’’ means the Companies Act, 2013 (18 of 2013); (b) ‘‘Annexure’’ means the Annexure appended to these rules; (c) ‘‘Fees’’ means the fees as specified in the Companies (Registration offices and fees) Rules, 2014; (d) ‘‘Form’’ or “eforms” means form set forth in Annexure to these rules which shall be used for the matter to which it relates; (e) ‘‘Regional Director’’ means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional ‘Director; (f) ‘‘section’’ means the section of the Act. (2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of definitions details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and said rules. 3. Registration of creation or modification of charge (1) For registration of charge as provided in sub-section (1) of section 77, section 78 and section 79, the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge in Form No.CHG-1 (for other than Debentures) or Form No.CHG-9 (for debentures including rectification), as the case may be, duly signed by the company and the charge holder and filed with the Registrar within a period of thirty days of the date of creation or modification of charge along with the fee. (2) If the particulars of a charge are not filed within the aforesaid period, but filed within a period of three hundred days of the date of such creation or modification, the additional fee shall be levied. (3) If the company fails to register the particulars of the charge with the Registrar within the period of thirty days of its creation or modification, the particulars of the charge together with a copy of the instrument, if any, creating or modifying such charge may be filed by the charge-holder, in Form No.CHG-1 or Form No.CHG-9, as the case may be, duly signed along with fee.
  8. 8. Borrowing Powers Page 8 (4) A copy of every instrument evidencing any creation or modification of charge and required to be filed with the Registrar in pursuance of section 77, 78 or 79 shall be verified as follows- (a) where the instrument or deed relates solely to the property situated outside India, the copy shall be verified by a certificate issued either under the seal of the company, or under the hand of any director or company secretary of the company or an authorised officer of the charge holder or under the hand of some person other than the company who is interested in the mortgage or charge; (b) where the instrument or deed relates, whether wholly or partly, to the property situated in India, the copy shall be verified by a certificate issued under the hand of any director or company secretary of the company or an authorised officer of the charge holder. 4. Condonation of delay by Registrar.- (1) The Registrar may, on being satisfied that the company had sufficient cause for not filing the particulars and instrument of charge, if any, within a period of thirty days of the date of creation of the charge, allow the registration of the same after thirty days but within a period of three hundred days of the date of such creation of charge or modification of charge on payment of additional fee. (2) The application for delay shall be made in Form No.CHG-10 and supported by a declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company. 5. Application of rules in certain matters.- The provisions of rule 4 shall apply, mutatis mutandis, to the registration of charge on any property acquired subject to such charge and modification of charge under section 79 of the Act. 6. Certificate of registration. – (1) Where a charge is registered with the Registrar under sub-section (1) of section 77 or section 78, he shall issue a certificate of registration of such charge in Form No.CHG-2 (2) Where the particulars of modification of charge are registered under section 79, the Registrar shall issue a certificate of modification of charge in Form No. CHG-3 (3) The certificate issued by the Registrar under sub-rule (1) and sub-rule (2) shall be conclusive evidence that the requirements of Chapter VI of the Act and the rules made there under as to registration of creation or modification of charge, as the case may be, have been complied with. 7. Register of charges to be kept by the Registrar.- (1) The particulars of charges maintained on the Ministry of Corporate Affairs portal ( be deemed to be the register of charges for the purposes of section 81 of the Act. (2) The register shall be open to inspection by any person on payment of fee.
  9. 9. Borrowing Powers Page 9 8. Satisfaction of charge.- (1) A company shall within a period of thirty days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to the Registrar in Form No.CHG-4 along with the fee. (2) Where the Registrar enters a memorandum of satisfaction of charge in full in pursuance of section 82 or 83, he shall issue a certificate of registration of satisfaction of charge in Form No.CHG-5. 9. Intimation of appointment of Receiver or Manager.- The notice of appointment or cessation of a receiver of, or of a person to manage, the property, subject to charge, of a company shall be filed with the Registrar in Form No. CHG.6 along with fee. 10. Company’s register of charges.- (1) Every company shall keep at its registered office a register of charges in Form No. CHG.7 and enter therein particulars of all the charges registered with the Registrar on any of the property, assets or undertaking of the company and the particulars of any property acquired subject to a charge as well as particulars of any modification of a charge and satisfaction of charge. (2) The entries in the register of charges maintained by the company shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be. (3) Entries in the register shall be authenticated by a director or the secretary of the company or any other person authorised by the Board for the purpose. (4) The register of charges shall be preserved permanently and the instrument creating a charge or modification thereon shall be preserved for a period of eight years from the date of satisfaction of charge by the company. 11. Register open for inspection.- The register of charges and the instrument of charges kept by the company shall be open for inspection- (a) by any member or creditor of the company without fees; (b) by any other person on payment of fee. 12. Condonation of delay and rectification of register of charges.- (1) Where the instrument creating or modifying a charge is not filed within a period of three hundred days from the date of its creation (including acquisition of a property subject to a charge) or modification and where the satisfaction of the charge is not filed within thirty days from the date on which such payment of satisfaction, the Registrar shall not register the same unless the delay is condoned by the Central Government. (2) The application for condonation of delay and for such other matters covered in sub-clause (a),(b) and (c) of clause (i) of sub-section (1) of section 87 of the Act shall be filed with the Central Government in Form No.CHG-8 along with the fee. (3) The order passed by the Central Government under sub-section (1) of section 87 of the Act shall be required to be filed with the Registrar in Form No.INC.28 along with the fee as per the conditions stipulated in the said order. - See more at: 2014.html#sthash.BFE4Cfcm.dpuf
  10. 10. Borrowing Powers Page 10 3 State the rules regarding acceptance of deposit by a company. Acceptance Of Deposits By Companies Under Companies Act, 2013 Non applicability The provisions relating to acceptance of deposits as in the Act and the rules made there under shall not applicable to the following companies:  A banking company;  A non banking financial company as defined in the Reserve Bank of India Act, 1934 registered with the Reserve Bank of India;  A housing finance company registered with National Housing Bank established under the National Housing Banking Act; and  A company specified by the Central Government under the proviso to Section 73(1) of the Act. The provisions relating to acceptance of deposits are applicable to the companies other than specified above. Rule 2(1)(e) defines the term ‘eligible company’ as a public company as referred to in Section 76(1)having a net worth of not less ₹ 100 crores or a turnover of not less than ₹ 500 crores and which has obtained the prior consent of the company in general meeting by means of a special resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits. Section 76(1) provides that notwithstanding anything contained in Section 73, a public company, having such net worth or turnover as may be prescribed, may accept deposits from persons other than its members subject to compliance with the requirements provided in Section 73 (2) and subject to such rules as the Central Government may, in consultation with the Reserve Bank of India prescribe. Such a company shall be required to obtain the rating from a recognized credit rating agency for informing the public the rating given to the company at the time of invitation of deposits from the public which ensures adequate safety and the rating shall be obtained for every year during the tenure or deposits. The company accepting secured deposits from the public shall within 30 days of such acceptance, create a charge on its assets of an amount not less than the amount of deposits accepted in favor of the deposit holders in accordance with such rules as may be prescribed.
  11. 11. Borrowing Powers Page 11 Definition of ‘deposit’ Rule 2(c) defines the term ‘deposit’ as including any receipt of money by way of deposit or loan or in any other form by a company. The deposit does not include- Any amount received from- Central government or a State Government; or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government; or any amount received from a local authority; or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature; Any amount received from- Foreign Governments; Foreign or international banks; Multilateral financial institutions, including but not limited to International Financial Corporation, Asian Development Bank, Common wealth Development Corporation and International Bank for Industrial and Financial Reconstruction; Foreign Governments owned development financial institutions; Foreign export credit agencies; Foreign collaborators; Foreign corporate bodies and foreign citizens; Foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 and rules and regulations made there under; Any amount received as a loan or facility from- Any banking company or State Bank of India or any of its subsidiary banks ; or A banking institution notified by the Central Government under Section 51 of the Banking Regulation Act, 1949; or A corresponding new bank as defined in Clause (d) of Section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; or in clause (b) of Section 2 of the Banking (Acquisition and Transfer of Undertaking) Act, 1980; or A co-operative bank as defined in Clause (b-ii) of Section 2 of the Reserve Bank of India Act, 1934. Any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India or any regional
  12. 12. Borrowing Powers Page 12 financial institutions or Insurance companies or scheduled banks as defined in the Reserve Bank of India Act; Any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India; Any amount received by a company from any other company; Any amount received and held pursuance to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for. For this purpose it is clarified by the Central Government that- Without prejudice to any other liability or section, if the securities for which application money or advance for such securities was received cannot be allotted within 60 days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within 15 days from the date of completion of 60 days, such amount shall be treated as a deposit under these rules. It is provided (newly inserted proviso with effect from 31.03.2015) unless otherwise required under the Companies Act, 1956 or the SEBI Act, 1992 or rules or regulations made there under to allot any share, stock, bond or debenture within a specified period, if a company had received any amount by way of subscriptions to any shares, stock, bonds or debentures before 01.04.2014 and disclosed it in the balance sheet for the financial year ending on or before 31.03.2014 against which the allotment is pending on 31.03.2015, the company shall, by 01.06.2015 either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules; Any adjustment of the amount for any other purpose shall not be treated as refund. Any amount received from a person who, at the time of receipt of th amount, was a director of the company. The director from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others; Any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Actexcluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within five years. If such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer. Any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non interest bearing security deposit; Any non interest bearing amount received or held in trust;
  13. 13. Borrowing Powers Page 13 Any amount received in the course of, or for the purposes of, the business of the company- as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of 365 days from the date of acceptance of such advance. In case any advance which is subject matter of any legal proceedings before any court of law, the said time limit of these 365 days shall not apply; an advance accounted for in any manner whatsoever, received in connection with consideration for an immoveable property under an agreement or arrangement, provided that such advance is adjusted against such property in accordance with the terms of agreement or arrangement; as security deposit for the performance of the contract for supply of goods or provision fo services; as advance received from long term projects for supply of capital goods except those covered under the item (b) above. If the amount received under items (a), (b) and (d) above becomes refundable, with or without interest, due to the reasons that the company accepting the money does not have necessary permission or approval, wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under these rules. For the purposes of this sub clause the amount referred to in the proviso shall be deemed to be deposits on the expiry of 15 days from the date they become due for refund. Any amount brought by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfillment of the following conditions namely: The loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance; The loan is provided by the promoters themselves or by their relatives or by both; and The exemption under this sub clause shall be available only till the loans of financial institution or bank are repaid and not thereafter; Any amount accepted by a Nidhi company in accordance with the rules made under Section 406 of the Act. For this purpose any amount- Received by the company, whether in the form of installments or otherwise, from a person with a promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any matter whatsoever; or Any additional contributions, over and above the amount under above made by the company as part of such promise or offer shall be treated as a deposit.
  14. 14. Borrowing Powers Page 14 Conditions prescribed for accepting deposits Section 73(2) provides that the company may, subject to the passing of resolution in general meeting; and such rules as may be prescribed by the Central Government in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions including the provision of security, if any, or for the repayment of such deposits with interest, as may be, agreed upon between the company and its members. The acceptance of deposits under this Section is subject to the following conditions: a circular shall be issued to its members which include a statement showing- the financial position of the company; the credit rating obtained; the total number of depositors; and the amount due towards deposits in respect of any previous deposits accepted by the company; and such other particulars in such form and in such manner as may be prescribed; filing a copy of the circular along with such statement with the Registrar within 30 days before the date of issue of the circular; depositing such sum which shall not be less than 15% of the amount of the deposit maturing during a financial year and the financial year next following and kept in a scheduled bank in a separate bank account to be called as deposit repayment reserve account; providing such deposit insurance in such manner and to such extent as may be prescribed; certifying that the company has not committed in any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on such deposits; and providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company. In case where a company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as ‘unsecured deposits’ and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits. Rule 3 provides for the terms and conditions for acceptance of deposits by the companies. The said Rule provides that with effect from 01.04.2014, no company under Section 73(2) and no eligible company shall- accept or renew any deposit whether secured or unsecured, which is repayable on demand or upon receiving a notice within a period of less than 6 months or more than 36 months from the date of acceptance or renewal of such deposits; accept or renew-any deposit from its members, if the amount of such deposits together with the amount of deposits outstanding as on the date of acceptance or renewal of such deposits from members exceeds 10% of the aggregate of the paid up share capital and free reserves of the company; any other deposit, if the amount of such deposit together with the amount of such other deposit, if the amount referred to in the above clause, outstanding on the date of acceptance or renewal exceeds 25% of aggregate or the paid up share capital and free reserves of the company; invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding the maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by non banking financial companies. The Central Government clarified that the person who is authorized, in writing, by a company to solicit deposits on its behalf and through whome deposits are actually procured shall only be entitled to the brokerage and payment of brokerage to any other person for procuring deposits shall be deemed to be in violation of these rules.
  15. 15. Borrowing Powers Page 15 The other conditions are as follows: If the depositors wants, the deposits may be accepted in joint names not exceeding three, with or without any of the clauses, namely ‘jointly; , ‘either or survivor’, ‘first named or survivor’ ‘anyone or survivor’; A company may, for the purpose of meeting any of its short term requirements of funds, accept or renew such deposits for repayment earlier than 6 months from the date of such deposit or renewal as the case may be subject to the condition that- Such deposits shall not exceed 10% of the aggregate of the paid up share capital and free reserves of the company; and Such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof; No Government company eligible to accept to accept deposits shall accept or renew any deposit, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal exceeds 35% of the aggregate of its paid up share capital and free reserves of the company; The company shall not reserve to itself either directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit, deposit trust deed and accept insurance contract after circular or in the form of advertisement is issued and deposits are accepted. Every eligible company shall obtain, at least once in a year, credit rating for deposits accepted by it with effect from 31.03.2015. Name of agency Minimum investment credit rating The Credit Rating Information Services of India Limited FA- (FA Minus) ICRA Limited MA- (MA Minus) Credit Analysis and Research Limited CARE BBB(FD) Fitch Ratings India Private Limited tA-(ind)(FD)
  16. 16. Borrowing Powers Page 16 4 If a company borrows beyond its powers, what remedies are open to a person who has lent money to the company? LENDERS’ RIGHTS AND REMEDIES Rights and Remedies. While an Event of Default occurs and continues Lenders may, without notice or demand, do any or all of the following: (a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Lenders); (b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and any Lender; (c) [Reserved]; (d) terminate any foreign exchange contracts among Borrower and any Lender; (e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Lenders consider advisable, notify any Person owing Borrower money of Lenders’ security interest in such funds, and verify the amount of such account; (f) make any payments and do any acts Lenders consider necessary or reasonable to protect the Collateral and/or Lenders’ security interest in the Collateral. Borrower shall assemble the Collateral if Lenders request and make it available as Lenders designate. Lenders may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to Lenders’ security interest and pay all expenses incurred. Borrower grants each Lender a license to enter and occupy any of Borrower’s premises, without charge, to exercise any of Lenders’ rights or remedies; (g) apply to the Obligations any (i) balances and deposits of Borrower any Lender holds, or (ii) amount held by any Lender owing to or for the credit or the account of Borrower; (h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Each Lender is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Lenders’ exercise of their rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to each Lender’s benefit; (i) place a “hold” on any account maintained with any Lender and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
  17. 17. Borrowing Powers Page 17 (j) demand and receive possession of Borrower’s Books; and (k) exercise all rights and remedies available to any Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof). Power of Attorney. Borrower hereby irrevocably appoints each Lender as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Lenders determine reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of any Lender or a third party as the Code permits. Borrower hereby appoints each Lender as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Lenders’ security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and no Lender is under further obligation to make Credit Extensions hereunder. Lenders’ foregoing appointment as Borrower’s attorneys in fact, and all of Lenders’ rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Lenders’ obligations to provide Credit Extensions terminate. Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Lenders may obtain such insurance or make such payment, and all amounts so paid by Lenders are Lender Expenses and immediately due and payable, bearing interest at the then highest applicable rate, and secured by the Collateral. Lenders will make reasonable efforts to provide Borrower with notice of Lenders obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Lenders are deemed an agreement to make similar payments in the future or Lenders’ waiver of any Event of Default.
  18. 18. Borrowing Powers Page 18 Application of Payments and Proceeds. Borrower shall have no right to specify the order or the accounts to which Lenders shall allocate or apply any payments made by Borrower to any Lender or otherwise received by any Lender under this Agreement when any such allocation or application is not specified elsewhere in this Agreement. If an Event of Default has occurred and is continuing, Lenders may apply any funds in their possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, and may apply any set off, to the Obligations in such order as Lenders shall determine in their sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Lenders for any deficiency. If Lenders, in their good faith business judgment, directly or indirectly enter into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Lenders shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Lenders of cash therefor. Lender’s Liability for Collateral. So long as a Lender complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of such Lender, such Lender shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral. No Waiver; Remedies Cumulative. No Lender’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall waive, affect, or diminish any right of any Lender thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Lenders and then is only effective for the specific instance and purpose for which it is given. Lenders’ rights and remedies under this Agreement and the other Loan Documents are cumulative. Lenders have all rights and remedies provided under the Code, by law, or in equity. Any Lender’s exercise of one right or remedy is not an election, and Lenders’ waiver of any Event of Default is not a continuing waiver. No Lender’s delay in exercising any remedy is a waiver, election, or acquiescence. Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by any Lender on which Borrower is liable.
  19. 19. Borrowing Powers Page 19 Agents. The Lenders may from time to time authorize, in writing (which writing may include, without limitation, any intercreditor agreement entered into among the Lenders) any one or more of the Lenders as Lenders’ agent(s) to perform any of the Lender’s obligations under the Loan Documents and/or to receive payments due to or effectuate or enforce any rights and remedies of Lenders under the Loan Documents, and upon such authorization the Lender so authorized shall have the authority to act for Lenders to the extent specified in such writing until such authority is revoked by the Lenders. For example (and not in limitation of the generality of the foregoing), the Lenders may authorize one of the Lenders to act as collateral agent for purposes of (a) perfecting the Lenders’ security interest in Collateral or (b) upon the occurrence of an Event of Default hereunder, acting for Lenders in collecting, taking possession of, or disposing of Collateral pursuant to Division 9 of the Code. Shared Collateral, Payments and Proceeds. The Borrower acknowledges and agrees that, notwithstanding the fact that the obligations of the Lenders to make their respective Term Loans are several and not joint, the Term Loans and other Obligations owed to the Lenders are secured by the same Collateral, and that such Term Loans and other Obligations may, at the option of Lenders, be treated as if they were owed to a single secured party, or an agent for Lenders, for purposes of enforcing the Lenders’ rights and remedies. As examples (and not in limitation of the generality of the foregoing), for purposes of a disposition of Collateral under Division 9 of the Code, (a) Lenders or Lenders’ agent may, at the option of Lenders, credit bid the aggregate of the Term Loans and other Obligations owed to the Lenders, and (b) the Borrower may not exercise any right it may have to tender debt for purposes of redeeming Collateral by tendering less than the aggregate of the Term Loans and other Obligations owed to the Lenders. In addition, the Borrower acknowledges and agrees that the Lenders may agree among themselves pursuant to an intercreditor or other agreement that payments and proceeds received with respect to the Obligations and/or the Collateral may be allocated in a certain way among the Lenders and that, for this purpose, a payment or proceed received by one Lender may be delivered to another Lender for application to the Obligations owed that Lender and in furtherance thereof payments and proceeds may be applied and reversed and re-applied.