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CS Professional · Strategic Management and Corporate Finance · Raising of Funds from Debt and Procedural Aspects

Sagar Textiles Ltd's Board passed a resolution at a meeting authorising its Managing Director to borrow up to ₹5 crore from banks on stated conditions. Is this delegation permissible under Section 179?

Yes. The Board may delegate the power to borrow to the managing director by a resolution passed at a meeting, on conditions it specifies. The proviso to Section 179(3) permits delegation of clauses (d) to (f) to a committee, managing director, manager or principal officer.

  1. ANo, the power to borrow can never be delegated by the Board
  2. BYes, the Board may by a meeting resolution delegate the power to borrow to the managing director on conditions it specifiesCorrect
  3. CYes, but only if delegated to a committee and not to the managing director
  4. DNo, delegation is allowed only by a special resolution of members

Explanation

The first proviso to Section 179(3) allows the Board, by a resolution passed at a meeting, to delegate the powers in clauses (d) to (f), including borrowing, to a committee of directors, the managing director, the manager or any other principal officer, on conditions it specifies. Members' special resolution is not required for the delegation, and the managing director is expressly named.

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