The IUP Journal of Law Review
Related Party Transaction and Regulatory Framework in India

Article Details
Pub. Date : Jan, 2020
Product Name : The IUP Law Review
Product Type : Article
Product Code : IUPLR20120
Author Name :Aayush Mayank Mishra
Availability : YES
Subject/Domain : Law
Download Format : PDF Format
No. of Pages : 14



Related party transaction is understood as an agreement or a deal, for business, between two or more parties who hold a pre-existing special relationship. The pre-existing relationship is not only confined to the company but also to its subsidiaries, joint ventures, substantial shareholders, executives, directors, key-managerial persons, etc. In every business group, the transaction with related party takes place and related party transaction per se is not prohibited. The related party transactions have come under close scrutiny in the recent years as many companies have misused it. Various cases have been registered before the judicial body dealing with related party transactions. Related party transaction is allowed if it comes under the ambit of ‘arm’s-length transaction’. This paper focuses on various aspects of related party transaction such as related party, relative and procedure to be followed by the companies when they are entering into related party transactions as laid down in Section 188 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.


The Companies Act, 2013 is considered as the landmark legislation in the new regime of Indian corporate sector as it puts more emphasis on the disclosure norms and the transparency of the companies in spite of the regulations of the Act. There was no formal definition of related party transaction in the Companies Act, 1956, but there were certain regulations related to the concept in the previous Act like the restrictions imposed on the related party transactions on the directors, etc., in which the relatives of such directors hold certain position in the firms. In the 2013 Act, the related party is defined and all the provisions related to it are enshrined under Section 188 of the Act.

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