CS Divesh Goyal
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SHORT SUMMARY Every company registered under this statute or any other as prescribed is required to disclose related party transactions, under Sections 188 and 189 of the Company Act 2013. Every business that engages in related party transactions is required by Section 189 of the 2013 Company Act
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FAQ :
Sections 188 and 189 of the Companies Act 2013 are related to related party transactions, requiring disclosure and recording in a contract register.
Adani Power failed to enter details of related party transactions into the contract register (Form MBP-4) as required by Section 189 of the Companies Act 2013.
Adani Power argued that the transactions were at arm's length and in the ordinary course of business, thus not covered by Section 188, and therefore no penalty should be imposed.
The company was unable to produce documentary evidence to support its claim that the transactions were at arm's length and in the ordinary course of business.
When determining the penalty, the Adjudication Officer considers disproportionate gain or unfair advantage, loss caused to investors, and the repetitive nature of the default.
Companies must keep proof of transactions if they consider them to be at arm's length, and auditors should request this proof if not provided.
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