valid as on 19/09/2019

Section 194. Prohibition on forward dealings in securities of company by director or key managerial personnel
Effective from 12-09-2013

(1) No   of a or any of its  shall buy in the company, or in its holding, or

(a) a right to call for delivery or a right to make delivery at a specified price and within a specified time, of a specified number of relevant or a specified amount of relevant ; or

(b) a right, as he may elect, to call for delivery or to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures.

(2) If a director or any key managerial personnel of the company contravenes the provisions of sub-section (1), such director or key managerial personnel shall be punishable with imprisonment for a term which may extend to two years or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

(3) Where a director or other key managerial personnel acquires any in contravention of sub-section (1), he shall, subject to the provisions contained in sub-section (2), be liable to surrender the same to the company and the company shall not register the securities so acquired in his name in the register, and if they are in dematerialised form, it shall inform the not to record such acquisition and such securities, in both the cases, shall continue to remain in the names of the transferors.

Explanation.—For the purposes of this section, ‘‘relevant shares’’ and ‘‘relevant debentures’’ mean shares and debentures of the company in which the concerned person is a or other key managerial personnel or shares and debentures of its holding and subsidiary companies.

Omitted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 09.02.2018. To view the notification,Click Here
2(34) Director means a director appointed to the Board of a company
2(20) Company means a company incorporated under this Act or under any previous company law
2(51) Key Managerial Personnel, in relation to a company, means—

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer; and

(v) such other officer as may be prescribed

2(87) Subsidiary , in relation to any other company (that is to say the holding company), means a company in which the holding company—

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed (Not notified)

Explanation.—For the purposes of this clause,—

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c) the expression “company” includes any body corporate;

(d) “layer” in relation to a holding company means its subsidiary or subsidiaries

2(6) Associate Company, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
Explanation.—For the purpose of this clause—
(a) the expression “significant influence” means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement;
(b) the expression “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement;
2(84) Share means a share in the share capital of a company and includes stock
2(30) Debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not
2(81) Securities means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
2(32) Depository means a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996)
2(94) Whole-time director includes a director in the whole-time employment of the company

Commencement Notification dated 09.02.2018


Enforcement notification S.O.2754 (E) dated 12/09/2013


The Companies (Amendment) Act, 2017 (Effective from 03.01.2018)


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