Register of Contracts 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.
A register that records everything records nothing, because nobody can read it.
What is exempt
The following transactions are exempted from being entered in the Register of Contracts and Arrangements in which the directors are interested:
- Sale/purchase/supply of any goods/services, if the value does not exceed five lakh rupees in the aggregate in any year;
- Transaction by a banking company for the collection of bills in the ordinary course of its business.
The register exists so that anyone entitled to inspect it can see, in one place, every contract in which a director has an interest. Its value lies in being readable — a member should be able to look through it and identify the arrangements that matter.
A register with no threshold defeats that. Every small purchase from a director's firm, every minor service, every routine reimbursement would be entered. In a group of any size that produces hundreds of entries a year, and a genuinely significant contract sits among them, indistinguishable in the list from a stationery order.
The five lakh rupees in the aggregate in any year threshold restores the signal. Note the drafting: in the aggregate, not per transaction. That closes the obvious avoidance route — a director's firm supplying twenty crore rupees of goods in tranches of four lakh each would otherwise never appear in the register at all. Aggregation by counterparty and by year makes the total the test.
The banking company collecting bills in the ordinary course of its business exemption is narrower and more specific. Bill collection is a high-volume mechanical service a bank performs for anyone who asks, at published charges, with no negotiation. A bank that entered every bill it collected for a director's business would generate a register of thousands of entries recording nothing but that the bank did its ordinary work.
Both exemptions share a shape: they exclude transactions where the entry could not tell a reader anything they would want to know. Neither excuses the disclosure of interest under section 184, which is a separate obligation on the director and is not measured by value at all.
The exemptions
| Transaction | Entry required? |
|---|---|
| Sale, purchase or supply of goods or services, up to INR 5 lakh in the aggregate in a year | No |
| The same, above that aggregate | Yes |
| Banking company collecting bills in the ordinary course | No |
| Any other contract in which a director is interested | Yes |
| Disclosure of interest under section 184 | Always |
Maintaining the register
- Aggregate by counterparty across the year rather than testing each invoice.
- Enter a contract as soon as the aggregate crosses five lakh rupees, including the earlier transactions.
- Keep it aligned with the Form MBP-1 disclosures given at the first board meeting of the year.
- Have it signed and kept as the rules require, and available for inspection.
- Reconcile it annually against the related party disclosures in the financial statements.
Common mistakes
- Applying the five lakh threshold to the register of contracts transaction by transaction.
- Omitting earlier transactions once the annual aggregate is crossed.
- Treating the exemption as excusing the section 184 disclosure.
- Extending the banking exemption beyond bill collection in the ordinary course.