Relative - Section 2(77) of the Companies Act, 2013

Amol Gopal Kabra (CA,CS,DISA) , Last updated: 30 May 2023
Share

In the earlier article, I have discussed the ‘related party’ as per section 2(76) of the Companies Act, 2013. In that definition, we have come across the word ‘relative’ a number of times. As such the word is vague. However, the word relative is defined under section 2(77) of the Companies Act, 2013 read with rule 4 of the Companies (Specification of definitions details) Rules, 2014. Let us understand the meaning of relative as defined in the Act and Rules.

Section 2(77) of the Companies Act, 2013 defines the word relative as below.

“relative”, with reference to any person, means any one who is related to another, if –

they are members of a Hindu Undivided Family;
they are husband and wife; or
on person is related to the other in such manner as may be prescribed.

Rule 4 of the Companies (Specification of definitions details) Rules, 2014 reads as follows

List of relatives in terms of clause (77) of section 2.-

A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:-

1. Father:

Provided that the term “Father” includes step-father.

2. Mother:

Provided that the term “Mother” includes step-mother.

3. Son:

Provided that the term “Son” includes step-son.

4. Son’s Wife.

5. Daughter.

6. Daughter’s husband.

7. Brother:

Provided that the term “Brother” includes step-brother.

8. Sister:

Provided that the term “Sister” includes step-sister.

The list given as above is very crystal clear. However, following needs to be understood.

Father, mother, son, brother and sister include the step-counterparts but there is no specific mention about step-daughter. It may be a drafting mistake or may be an intentional exclusion. Whatever it may be, but the plain interpretation of the section indicates that step daughter is not a relative.

We get one more surprising thing here. In one case, a person can be relative of another in one way, but the reverse way, the person is not a relative. For example, Mr. A has a step daughter Ms. B. So for Ms. B, Mr. A, being a step-father, is a relative. However, for Mr. A, Ms. B is not a relative as step-daughter is not a relative.

It is worth considering that son’s wife includes step son’s wife. However, daughter’s husband does not include step daughter’s husband.

On division of a Hindu Undivided Family, the members of the family, except included in the above list of relatives, cease to be relatives.

Also, if we compare with Companies Act, 1956, the list of relatives is drastically cut short. The following table will show the comparison of respective acts.

Sr. No.	Relative	1956 Act	2013 Act
1	Members of HUF	Yes	Yes
2	Husband	Yes	Yes
3	Wife	Yes	Yes
4	Father	Yes	Yes
5	Step Father	No	Yes
6	Mother	Yes	Yes
7	Step Mother	Yes	Yes
8	Son	Yes	Yes
9	Step Son	Yes	Yes
10	Son’s Wife	Yes	Yes
11	Daughter	Yes	Yes
12	Step Daughter	Yes	No
13	Daughter’s Husband	Yes	Yes
14	Brother	Yes	Yes
15	Step Brother	Yes	Yes
16	Sister	Yes	Yes
17	Step Sister	Yes	Yes
18	Father’s Father	Yes	No
19	Father’s Mother	Yes	No
20	Mother’s Mother	Yes	No
21	Mother’s Father	Yes	No
22	Son’s Son	Yes	No
23	Son’s Son’s Wife	Yes	No
24	Son’s Daughter	Yes	No
25	Sons’ Daughter’s Husband	Yes	No
26	Daughter’s Son	Yes	No
27	Daughter’s Son’s Wife	Yes	No
28	Daughter’s Daughter	Yes	No
29	Daughter’s Daughter’s Husband	Yes	No
30	Brother’s Wife	Yes	No
31	Sister’s Husband	Yes	No

To conclude on a lighter note, the Companies Act, 1956 considered the joint family size concept, whereas, the Companies Act, 2013 as taken into account the modern family size, i.e. the nuclear family and has reduced the list of relatives from the long list to a small list.

CA Amol G. Kabra

Author of ‘MyCorporate.in’ Blog

To know more about what the term 'Relative' means, as per the Income Tax Act, 1961 click here