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Section 192: Restriction on non-cash transactions involving directors

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Act 2013
Section 191 All 470 Sections of Companies Act Section 193
Statutory Defined Terms in this Section: (Click any term for official legal definition)
Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 192

Section 192 regulates non-cash transactions involving directors and connected persons, prohibiting asset acquisitions between the company and its directors without prior shareholder approval backed by an independent valuation report.

  • Prohibition on Non-Cash Asset Swaps: A company cannot enter into an arrangement whereby a director of the company (or its holding, subsidiary, or associate) or a person connected with such director acquires or transfers assets for consideration other than cash without prior approval.
  • Prior Shareholder Resolution Mandate: Requires prior approval by an ordinary resolution of the company in general meeting; if the director or connected person is a director of the holding company, approval by a resolution of the holding company is equally mandatory.
  • Valuation Report Condition Precedent: The notice for the general meeting must explicitly include particulars of the arrangement along with a valuation report prepared by an independent registered valuer under Section 247, establishing the fair value of the non-cash asset.
  • Statutory Voidability and Restitution: Any arrangement entered into in breach of Section 192 is voidable at the option of the company, unless restitution is impossible, the company has been indemnified, or third-party bona fide rights have accrued.
Key Landmark Precedents:
  • Guinness Plc v. Saunders, [1990] 2 AC 663 (HL): The House of Lords held that directors cannot take personal advantage of corporate property or enter into unauthorized remuneration/asset contracts with the company; failure to follow strict constitutional procedures renders contracts unenforceable.
  • Aberdeen Railway Co. v. Blaikie Brothers, (1854) 1 Macq 461: The landmark rule that no fiduciary shall be allowed to enter into engagements in which he has a personal interest conflicting with the interests of those whom he is bound to protect, underpinning Section 192's statutory voidability.
Courtroom Practice & Strategic Litigation Guidance:

When auditing or challenging property-for-shares or asset transfer agreements involving promoters, verify the date of the registered valuer's report against the notice of the general meeting. If the asset was transferred prior to passing the Section 192 resolution or without a certified valuation, file an NCLT application to declare the transaction void and demand physical restitution of the corporate assets.

Section 191 All 470 Sections of Companies Act Section 193