Call it a matter of relative importance. But the Companies Bill, 1997, which seeks to repeal and re-enact the Companies Act, 1956 has once again failed to come to grips with a fundamental fraternal issue: just who counts as a brother-in-law?

The issue arises in clause 2(58) which defines the list of "relatives", as implying a person who is related to another in the manner of a: spouse; father (including step-father); mother (including step-mother); son (including step-son); son's wife; daughter (including step-daughter); daughter's husband; son's son; son's daughter; daughter's son; daughter's daughter; brother (including step-brother); brother's wife; sister (including step-sister); and sister's husband. While the list mentions one brother-in-law-the sister's husband-it fails to invoke the possibility of the other brother-in-law-the wife's brother-counting as a relative. The definition gains significance in the light of defining a company director's interest. According to clause 235, "Every director of a company who is, in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the board." Further, the declaration of relatives in conjunction with "interest" comes into application under clauses 233 and 234-the former relates to loans and the latter to granting of contracts. According to clause 233: "No company shall, except with the previous consent of the company accorded by a special resolution in a general meeting, directly or indirectly, make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by (a) any managing or whole-time director of the lending company or of a company which is its holding company, or any partner or relative of any such director, (b) any firm in which any such director or relative is a partner and, (c) any private company of which any such director is a director or a member."

Similarly, clause 234 sternly warns: "Except with the consent of the Board, a director of the company or his relative, a firm in which a director or relative is a partner, any other partner in such a firm, or a private company of which a director is a member or director, shall not enter into any contract with the company (a) for the sale, purchase or lease of any property, (b) for sale, purchase or supply of any goods, or services or, (c) for under-writing the subscription of any shares in, or debentures of, the company." In fact, to ensure that there is better transparency and that no undue favours are shown to relatives, the Institute of Company Secretaries of India had made representations to the drafting panel of the Companies Bill, 1997 to include the wife's brother too in the list of relatives to be declared by a director. The drafters' logic: the term relative should extend only to blood ties. But, counters Ashok Kumar Goyal, chairman of the Northern India Regional Council of the Institute, "In real life there are more chances of being partial to one's wife's brother than one's sister's husband. So if one brother-in-law is included, the other should also be included." According to the Companies Bill, 1997 though, only ties that bind -- and not those that bond -- count.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.