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THEIR FAILINGS, OUR LEARNINGS

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WHEN THE CHOICE IS UNCLEAR

Context:

A Nominee Director is often conflicted in regard to choices to be made while taking decisions. In the situation described hereinbelow, a Nominee Director has to grapple with choices that are not unmixed blessings.

  • Company XYZ has taken loans from Bank A and Bank B.
  • The outstanding amounts of the 02 (two) loans are identical.
  • Bank A has a Nominee Director on the Board of XYZ.

 

Point to ponder

  • What, if any, is the role of the Nominee Director in the following situations?
    1. Situation 1:
      • XYZ defaults in its installment to Bank B, but has paid the installment to Bank A on time.
    2. Situation 2:
      • Rate of interest charged by Bank A on the loan is 15%.
      • Rate of interest charged by Bank B on the loan is 18%.
      • XYZ repays the loan of Bank B, and delays/ defaults on its repayment to Bank A.
    3. Situation 3:
      • XYZ services the two loans on time but defaults in payments of statutory dues.