Interested director participation and book entries can sustain a voidable resolution and a valid loan transaction.

An interested director cannot vote on a matter in which he has a personal interest, and his presence cannot be counted for quorum for that transaction; however, the resulting resolution is irregular and voidable at the company's instance, not void, and may be affirmed by the company. The article also states that a loan may be proved by debit and credit entries in the company's books, even without the physical passing of cash, where the entries and a promissory note show a completed advance. A plea of illegality was not examined because it had not been properly raised below.

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Issues: (i) Whether the allotment of shares to the nominees of a director was invalid because the director was interested in the transaction and his presence could not count towards quorum. (ii) Whether the debit and credit entries in the company's books constituted a loan advanced to the appellant, and whether the appellant could resist recovery on the ground of illegality or absence of consideration.

Issue (i): Whether the allotment of shares to the nominees of a director was invalid because the director was interested in the transaction and his presence could not count towards quorum.

Analysis: A director cannot vote on a matter in which he is interested, and his presence cannot be counted for quorum for that transaction. If the interested director's vote is excluded and no quorum remains, the resolution is irregular and voidable at the instance of the company, but not void. The company may waive the irregularity and affirm the transaction. The appellant, having participated in and acted upon the allotment as operative, was also estopped from denying its validity.

Conclusion: The allotment was not void; it was at most irregular and, having been affirmed by the company, remained valid and binding. This issue was decided against the appellant.

Issue (ii): Whether the debit and credit entries in the company's books constituted a loan advanced to the appellant, and whether the appellant could resist recovery on the ground of illegality or absence of consideration.

Analysis: A payment or loan need not involve physical passing of cash; transfer entries in the books of account may amount to payment. The entries made on the relevant date credited the borrower's account and debited the appellant, with a promissory note executed by the appellant, and the transaction operated as a loan. The plea that no actual cash passed did not defeat the claim. The separate contention based on illegality under the Companies Act was not entertained as it had not been properly raised below.

Conclusion: The book entries constituted a valid loan transaction, and there was no failure of consideration. This issue was decided against the appellant.

Final Conclusion: The appellate challenge failed on the merits, and the decrees in favour of the bank were maintained.

Ratio Decidendi: An interested director's participation makes the resolution irregular and voidable, not void, and a loan may be proved and enforced through valid book entries without the passing of cash.

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