Insolvency and Bankruptcy Code, 2016 | Section 193

Section 193 of IBC 2016: Member Not to Participate in Meetings in Certain Cases

Section 193 addresses conflicts of interest in meetings of the Insolvency and Bankruptcy Board of India (IBBI). A Board member with a specified financial interest must disclose it and refrain from deliberating or deciding the affected matter.

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Section 193: Statutory provision

Any member, who is a director of a company and who as such director has any direct or indirect pecuniary interest in any matter coming up for consideration at a meeting of the Board, shall, as soon as possible after relevant circumstances have come to his knowledge, disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the Board, and the member shall not take any part in any deliberation or decision of the Board with respect to that matter.

Meaning of Section 193 and its requirements

1. Who is covered?

The statutory wording concerns a member of the IBBI who is also a director of a company and, in that capacity, has a direct or indirect pecuniary interest in a matter before the Board. The term pecuniary interest refers to an interest involving money or financial benefit or exposure.

2. Disclosure of the interest

Once the relevant circumstances become known, the member must disclose the nature of the interest at the Board meeting as soon as possible. The disclosure must be recorded in the Board proceedings.

3. No participation in the affected matter

The member must not participate in the Board's deliberation or decision concerning that matter. Disclosure alone does not permit the member to continue taking part in that business.

4. Purpose of the provision

The rule protects the impartiality and integrity of the regulator's decisions by separating a member's financial interests from the Board's official business. It concerns IBBI Governing Board meetings, not ordinary meetings of a corporate debtor's committee of creditors.

Related IBBI Governing Board meeting regulations

Regulation 10 of the Insolvency and Bankruptcy Board of India (Procedure for Governing Board Meetings) Regulations, 2017 also addresses conflicts of interest. Its wording covers every member directly or indirectly concerned or interested in business before the Governing Board, requires disclosure and recording of that interest, and prohibits participation in deliberation or decision on the affected business.

The explanation to Regulation 10 extends direct or indirect concern or interest to interests held personally, through relatives as defined by section 2(77) of the Companies Act, 2013, or through being a partner or director of the concern. This regulatory formulation is broader than the particular company-director pecuniary-interest situation expressly described in Section 193.

Section 192 of the Code separately governs Board meeting procedures, presiding members and voting. Section 193 operates alongside those meeting rules as a conflict-of-interest safeguard.

Practical example

Suppose an IBBI Governing Board member is a director of a company whose financial interests may be affected by a proposed Board decision. If the member has a direct or indirect pecuniary interest in the matter in that capacity, Section 193 requires the member to disclose the interest, have the disclosure recorded, and abstain from discussion and decision on that matter. The precise application depends on the facts and any applicable regulations.

Official legal sources and further reading

This article explains the statutory provision and related governance requirements. Consult the latest notified regulations and amendments for a particular matter.