Non-Cash Transactions explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 192 of the Companies Act, 2013 governs arrangements in which assets move between a company and its directors for something other than money. In an insolvency it is often the first place a transaction audit finds an avoidable transfer already recorded as irregular.
The prohibition
No company shall enter into arrangements where:
- a director, or a person connected with them, acquires assets for consideration other than cash from the company; or
- the company acquires assets for consideration other than cash from a director or connected person.
Both directions are covered, and that symmetry matters. Value can be extracted by selling a company asset to a director cheaply, or by buying a director's asset at an inflated price — and non-cash consideration makes either far harder to detect than a payment out of the bank.
What the section requires instead
Non-cash transactions of this kind are not forbidden outright; they are conditioned on three things:
- Prior approval by resolution at a general meeting of the company.
- Where the director is also a director of the holding company, approval must also be obtained from the holding company's general meeting.
- The notice for the resolution must include details of the arrangement and the asset values, which should be assessed by a registered valuer.
The two requirements work together. Shareholder approval on its own would be worthless if the members were asked to approve an arrangement whose value nobody had established — which, in a promoter-controlled company, is exactly what would happen.
Requiring a registered valuer's assessment in the notice means the members vote on a number produced by someone independent. It also creates a contemporaneous valuation document, which is precisely what a later section 45 avoidance application needs when it has to plead the basis of market value.
The consequence of breach
Any arrangement made in violation of section 192 is voidable at the company's discretion — unless:
- restitution of the money or consideration is impossible and the company has been indemnified for any loss; and
- rights are acquired bona fide for value without knowledge of the contravention.
Two features are worth noting. The arrangement is voidable, not void, so it stands until the company elects to avoid it — and after admission that election is made by the resolution professional exercising the board's powers. And the protection for a third party requires all three of good faith, value and absence of knowledge.
Why this section earns its place in an insolvency chapter
Non-cash transactions with directors sit at the intersection of three avoidance provisions:
| Provision | How the arrangement may be caught |
|---|---|
| Section 43 | If the director was also a creditor, surety or guarantor and the transfer discharged an antecedent debt, putting them ahead of the section 53 waterfall |
| Section 45 | If the asset moved for consideration significantly less than what the company gave, outside the ordinary course of business — with a two-year look-back for a related party |
| Section 66 | If the arrangement was part of conducting the business with intent to defraud creditors |
A director is by definition a related party, which extends the look-back to two years and, for an undervalue, brings the deeming provisions into play.
What to look for in the records
Four markers identify non-cash transactions that were never properly authorised:
- Assets transferred to or from directors with no corresponding bank movement — the recurring signature of an avoidable transaction.
- Absence of a general meeting resolution for such an arrangement.
- Absence of a registered valuer's report in the notice, where a resolution was passed.
- Approval taken at the company's own meeting but not at the holding company's, where the director sat on both boards.
Common mistakes
- Reading section 192 as reaching only non-cash transactions in which the company is the seller.
- Treating the arrangement as void rather than voidable at the company's election.
- Overlooking the separate holding company approval.
- Ignoring a section 192 breach as a Companies Act matter with no insolvency consequence.