Section 192: Restriction on non-cash transactions involving directors
This section is for restricting and regulating transactions between a company and its directors or their connected persons that do not involve cash.
The section, clause by clause
What the section says
In plain terms
(1)No company shall enter into an arrangement by which—
A company cannot make a deal to buy or sell assets without using cash with one of its directors or their connected person, or with a director of its holding, subsidiary, or associate company, unless the company's shareholders and the holding company's shareholders, if applicable, agree to it in a meeting.
(1)(a)a director of the company or its holding, subsidiary or associate company or a person connected with him acquires or is to acquire assets for consideration other than cash, from the company; or
(1)(b)the company acquires or is to acquire assets for consideration other than cash, from such director or person so connected, unless prior approval for such arrangement is accorded by a resolution of the company in general meeting and if the director or connected person is a director of its holding company, approval under this sub- section shall also be required to be obtained by passing a resolution in general meeting of the holding company.
(2)The notice for approval of the resolution by the company or holding company in general meeting under sub-section (1) shall include the particulars of the arrangement along with the value of the assets involved in such arrangement duly calculated by a registered valuer.
When asking shareholders to approve such a deal, the company must provide details of the arrangement and the value of the assets, as determined by a registered valuer.
(3)Any arrangement entered into by a company or its holding company in contravention of the provisions of this section shall be voidable at the instance of the company unless—
If a company makes a deal that breaks these rules, it can cancel the deal unless it is no longer possible to reverse the transaction and the company has been compensated for any losses, or someone else has already bought the assets without knowing about the rule-breaking.
(3)(a)the restitution of any money or other consideration which is the subject matter of the arrangement is no longer possible and the company has been indemnified by any other person for any loss or damage caused to it; or
(3)(b)any rights are acquired bona fide for value and without notice of the contravention of the provisions of this section by any other person.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 22 of 2019, s. 28, for sub-section (5) (w.e.f. 2-11-2018).
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.