Inter-corporate loans - Under same management - Whether clause (iii) of sub‑section (1B) applies to Government companies - Companies Law - Circular : No. 9/76

Circular : No. 9/76 [13/127/6 ‑ CL-VI and 1/1/76 ‑ CL-V], dated 19 ‑ 5 ‑ 1976. Subject:- Inter-corporate loans - Under same management - Whether clause (iii) of sub ‑ section (1B) applies to Government companies A question has been raised whether Government companies will be deemed as falling under the same management within the meaning of sub‑section (1B)(iii) of section 370 as the President of India or the Governor of a State, as the case may be, holds the majority of shares and exercises or controls the voting rights. The matter has been considered in the Department and the Department is of the view that the President or the Governor holds shares in companies by virtue of the constitutional provisions which permit Union or the State acquiring, holding and disposing of properties and also to carry on business by the Union or the State. Since the President or the Governor does not hold the shares and exercises or controls voting rights. As individual in Government companies, the provisions of sub‑ section (1B)(iii) will not be attracted. In the aforesaid premises, the Government companies will not be deemed to be under the same management, within the meaning of section 370.