In each of the following questions, two statements numbered I and II are given. There may be cause and effect relationship between the two statements. These two statements may be the effect of the same cause or independent causes. These statements may be independent causes without having any relationship. Read both the statements in each question and mark your answer. Statements: I. Hotel Leela venture, which currently has a debt of over Rs. 3,600 crore, had issued secured redeemable non-convertible debentures on private placement basis aggregating to Rs. 90 crores to LIC in December, 2008. II. Hotel Leela venture’s "operating cash flows are not sufficient to service its term loans and NCDs and the funds of the company are escrowed with its lenders and are also monitored by the lenders".?

Option 1 : Statement I is the cause and Statement II is its effect.

The correct answer is option 1, i.e. Statement I is the cause and Statement II is its effect.

From both the statements, it is evident that Statement II is the cause that because of the fact that Hotel Leelaventure’s cash flows are not sufficient to service its tern loans and the funds it has not been able to pay its debt of over Rs 3,600 crore and as a result issued secured redeemable non-convertible debentures. Statement II logically acts as the effect of the statement I which is the cause or the root for the non-payment of loan by the Hotel. Thus, the most appropriate answer choice is option 1.