Transaction with company in which director is involved

(1) Except as otherwise provided this Section, no public company shall, without approval of the general meeting, do any significant transaction with its director or his/her close relative or substantial shareholder or no subsidiary company shall, without approval of the general meeting of its holding company, do any significant transaction with any director or his/her close relative or substantial shareholder of the holding company.

Explanation: For the purposes of this Section, “significant transaction” means a transaction of sale, purchase, exchange and contract the value of which, at the time of doing the transaction, exceeds one hundred thousand rupees or five percent of the total assets of the company, whichever is the lesser, and this term also includes a rental transaction amounting to one hundred twenty thousand rupees or more annually.

(2) If any transaction is done in contravention of Sub-section (1), any amount or benefit derived from that transaction directly or indirectly shall be returned to the company; and if any loss or damage is caused by such transaction to the company, the person deriving benefit from such transaction shall also pay compensation for such loss or damage.

(3) Notwithstanding anything contained elsewhere in this Section, the provision of Sub-section (1) shall not apply to the in-kind property acquired as follows :

(a) While acquiring such property by a holding company from its wholly owned subsidiary company;

(b) While acquiring such property by a subsidiary company wholly owned by a holding company from another subsidiary company wholly owned by the same holding company;