Is a director considered interested in a trasaction by company with such director's relative?

C V J (Business) (3 Points)

13 July 2023  

Consider this situation:

"A company wants to purchase raw material from the wife of its director. The question is whether director shall be considered interested in this transaction."

Let me clarify what i have understood myself so far:

- Section 2(76) considers director's relative to be related party to the company.

- Section 2(77) includes the wife within the meaning of relative.

- Rule 15 of the MBP rules provides that:

"Where any director is interested in any contract or arrangement with a related party, such director shall not be present at the meeting during discussions on the subject matter of the resolution relating to such contract or arrangement"

In section 188 or the above mentioned rule, the definition of "Interested" is not given.

However, we do have section 184(2) which can be referred to ascertain the meaning of "Interested Director" (i have included screenshot of the section for reference)

Problem is that this section only refers to contract or arrangement with Artificial Judicial Persons (Body Corporate/Firm/Any other entity).

So, prima facie, if company enters into a transaction with relative of a director, the director should not be deemed to be interested.

However the above conclusion goes against common sense. How can a director not be interested in the  given situation?

I would be thankful if someone could resolve this query of mine.