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CS Executive · Company Law and Practice · Board Composition and Powers of the Board

Bharat Steel Ltd's Board has authorised its Managing Director to arrange overdraft facilities with its bankers. Under Explanation II to section 179(3), what does the exercise of the borrowing power mean in dealings with bankers?

It means the arrangement made with the bankers for borrowing by way of overdraft, cash credit or otherwise. Explanation II to section 179(3) clarifies that the actual day-to-day operation of those accounts is not the exercise of the borrowing power needing a Board resolution.

  1. AEach day-to-day withdrawal on the overdraft account
  2. BThe arrangement made with the bankers for borrowing, not the actual day-to-day operation of the accountsCorrect
  3. COnly borrowings from the Reserve Bank of India
  4. DOnly borrowings that are repayable after one year

Explanation

Explanation II says that in dealings with bankers, exercising the borrowing power means the arrangement made for borrowing by overdraft, cash credit or otherwise, not the actual day-to-day operation of those accounts. Hence daily withdrawals need no separate Board resolution.

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