Section 4C · Related party transactions

¹[4C. Related party transactions.---(1) Except with the consent of the Board and subject to such conditions as may be prescribed, the Corporation shall not enter into any contract or arrangement with a related party with respect to

(a) sale, purchase or supply of any goods or materials;

(b) selling or otherwise disposing of, or buying, property of any kind;

(c) leasing of property of any kind;

(d) availing or rendering of any services;

(e) appointment of any agent for purchase or sale of goods, materials, services or property;

(f) such related partys appointment to any office or place of profit in the Corporation, its subsidiary or associate company;

(g) underwriting the subscription of any securities, or derivatives thereof, of the Corporation:

Provided that no contract or arrangement involving transactions exceeding such sums as the Board may specify, shall be entered into except with the prior approval in the general meeting:

Provided further that no member shall vote in such general meeting to approve any contract or arrangement which may be entered into by the Corporation, if such member is a related party:

Provided also that nothing in this sub-section shall apply to any transactions entered into by the Corporation in its ordinary course of business, other than transactions which are not on an arm's length basis:

Provided also that the requirement of approval under the first proviso shall not be applicable for transactions entered into between the Corporation and---

(a) its wholly owned subsidiary, if any, whose financial statements are consolidated with the Corporation and placed before the members at the general meeting for adoption;

(b) a Government company, or the Central Government, or any State Government, or any combination thereof, in respect of contract or arrangement entered into between them.

Explanation.---In this sub-section,---

(a) the expression office or place of profit means any office or place---

(i) where such office or place is held by a director, if the director holding it receives from the Corporation anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;

(ii) where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the Corporation anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;

(b) the expression arm's length transaction means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.

(2) The Board shall formulate a policy on materiality of related party transactions and on dealing with related party transactions, including clear threshold limits, and shall review and update such policy at least once in every three years.

Explanation.---For the removal of doubts, it is hereby clarified that a transaction with a related party shall be considered material if the amount of the transaction to be entered into, individually or taken together with previous transactions during a financial year, exceeds such percentage of the annual consolidated turnover of the Corporation as per its last audited financial statements as may be specified in any regulation made by the Securities and Exchange Board in this behalf.

(3) Every contract or arrangement entered into under sub-section (1) shall be referred to in a report made by the Board to the members, along with the justification for entering into such contract or arrangement.

(4) Where any contract or arrangement is entered into by a director or any other employee, without obtaining the consent of the Board or approval by a resolution in the general meeting under sub-section (1) and if it is not ratified by the Board or, as the case may be, by the members at a meeting within three months from the date on which such contract or arrangement was entered into, such contract or arrangement shall be voidable at the option of the Board or, as the case may be, of the members and if the contract or arrangement is with a related party to any director, or is authorised by any other director, the directors concerned shall indemnify the Corporation against any loss incurred by it.

(5) Without prejudice to anything contained in sub-section (4), it shall be open to the Corporation to proceed against a director or any other employee who had entered into such contract or arrangement in contravention of the provisions of this section for recovery of any loss sustained by it as a result of such contract or arrangement.

(6) Any director or any other employee of the Corporation who had entered into or authorised a contract or arrangement in violation of the provisions of this section, shall be liable to pay penalty of a sum of up to twenty-five lakh rupees.]