They say when the word is not defined in any statute meaning has to be derived from general meaning or dictionary meaning. Lord Hoffmann says that “the meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax …”

This highlights very important principle – while reading law, meaning of word has to be interpreted in context / background.

One very popular section under Companies Act 2013 [the Companies Act] is section 188 which provides a framework for approval of related party transactions under the Act. And almost all the key words used in this section, for example word goods, material, services, property, leasing etc are not defined . These words have multiple meanings in dictionaries and other laws. If we have to evaluate whether shares would be considered as goods or property for the purpose of section 188 or not, we will have to see meaning of goods and property and also the background/ context in which it is used.

Let’s first evaluate term ‘goods. Term goods is not defined in the Companies Act. There are multiple meanings for word ‘goods’ in dictionaries and other laws. While Sale of Goods Act, 1930 [Sale of Goods Act] include share as goods, Securities Contracts (Regulation) Act, 1956 (SCRA)excludes shares from the definition of goods. The question that arises is which definition is to be applied while interpreting word goods in context of section 188?

Like Lord Hoffman says meaning of words have to be interpreted in context/ background in which it is used.

Let’s see the context/ background of Sale of Goods Act. Sale of Goods Act basically provides framework for transaction of sale of goods like let the buyer be aware, rights and obligations of buyer and seller etc. Whereas SCRA specifically excludes shares from definition of goods because SCRA regulates trading in commodities as well as securities and therefore to avoid shares getting regulated both under securities and goods, it had to say that shares and securities would not fall under the definition of goods.

The context of section 188 is to provide framework for approving related party transactions. Section 188 also makes it clear that if transaction is in ordinary course and at arm’s length then provisions of this section will not apply. Obviously intent is very clear that transactions between company and related party which are either not at arm’s length or not in ordinary course will be regulated by section 188. In this context considering that trading in shares/ securities not being considered as goods and therefore not covered under section 188 can be absurd, particularly from context that many companies may not be in business of buying/ selling shares or securities.

Second question which arises is whether shares/ securities would be considered as property for the purpose of section 188. Section 44 of Companies Act specifically says shares or debentures in company shall be treated as movable property of a member and it is transferable in the manner provided in articles of the company. Therefore, it is beyond doubt that shares are considered as transferable property of member for the purpose of Companies Act, 2013. However, from the context of a company which classifies its holding in shares as stock in trade would it not be appropriate to compare materiality from context of turnover ?

Surely, a company which considers its holding in shares as investment it would be appropriate to evaluate its materiality in terms of net-worth and for the company which is in business of trading in share and considers shares as stock it would be appropriate to evaluate its materiality in terms of turnover.

Since these words [like goods, property] are very general and can have multiple meanings was that the intention of law maker to keep open ended words and interpret these in context of that company [like we discussed above]? Was this the reason why Companies Act 2013 has not defined it in the Act? I think yes, what you think?

Investors Compensation Scheme Ltd v West Bromwich Building Society, Investors Compensation Scheme Ltd v Hopkin & Sons (a firm), Alford v West Bromwich Building Society[1998] 1 BCLC 493 at 547-548, [1998] 1 WLR 896 at 912-913, Lord Hoffmann.

 Clause (a) to (g) of section 188 of Companies Act, 2013

 Section 2(7) of the Sale of Goods Act, 1930, defines the term ‘goods’ as every kind of movable property other than actionable claims and money, and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Further Section 2(bb) of Securities Contracts (Regulation) Act, 1956 (SCRA), define it as “goods  mean  every kind  of  movable  property  other  than  actionable  claims,  money  and  securities.

 Term goods would be regulated as commodity under section 2(bc) of SCRA

 4^th Proviso to Section 188(1) of Companies Act, 2013

 Clause (a) and (b) of Section 188(1) of Companies Act, 2013 r/w Rule 15(3)(a)(i) and (ii) of Companies (Meeting of Board and its powers) Rules, 2014

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Many times, people ask me what it takes for a SME to become a listed company? Being a company secretary I can speak for hours on the line of governance and compliance which a listed company needs to follow as compared to closely held company, however, is compliance alone enough to sustain a company in the absence of incremental financial success? In today’s materialist world is it possible even to retain and hire best people to run compliance and governance function without ensuring continuous growth for the SME company?

In my experience, the biggest challenge for SME is to be in mindset of growth and excellence all throughout. Once you are listed, investor becomes one additional critical stakeholder and investor wants growth.

Everyone wants to grow but growth is not free. At times growth needs lot of sacrifice. My experience says unless the leader of the organisation is growth obsessed, organisation goes in maintenance or can even go in slow decay process. In any organisation if some individuals grow financially without being obsessively focused on excellence and growth, consider that someone else is doing this for them.

So, for SME to transform to mainstream listed company, first it needs to master growing and doubling size in predefined timeline. Unless the company cracks this formula while being 100% compliant and ethical , we should not even think about getting listed. And once you are listed you must have lot of processes, controls, protocols like approval of independent director for many business decisions and therefore speed needs to get replaced with extra ordinary planning and exceptional alignment.

Data shows that those companies which are continuously in small cap index are growing at CAGR of ~17 to 20%. And if an entity does not aspire to be in leadership category probably listing is not a good idea.

Once you are listed, it is almost a norm to engage with investors every quarterly after the financial results is declared  and management answers questions of investors. Answering and meeting expectations of investors quarter on quarter is a task and unless entire organisation is wired to work towards it and unless leader ensure vector alignment in the organisation this is not possible.

The companies which were growth obsessed but not disciplined also went to bigger trouble of IBC. Almost 8-10% companies of top 500 companies in India went through IBC process. This highlights that excellence obsessed is a precursor for growth obsession for being a listed company. if we are afraid to fail, if our projects get delayed regularly, if customer satisfaction is less than 70-80%, if employee satisfaction is less than 80% then even if a company grows at times, it will not be sustainable and therefore should not go for listing. Off course these are just few examples but not out of context.

In fact, I suggest and insist every company planning to go for an IPO to behave as if it is a listed company to experience and master this trait. If this works well, either entrepreneur and company realises its true potential, or it accepts that it should not go for listing.

————————————————————————————————————————

 Section 166(2) of Companies Act casts duty on every director to ensure that the interest of every stakeholder are addressed.

 Under Regulation 19(4) r/w Schedule III of SEBI (LODR) Regulations, 2015, the appointment of Senior Management requires the recommendation of the NRC. Furthermore, Regulation 23 mandates prior approval of the Audit Committee for all related party transactions

 Under Regulation 30 read with Para A of Part A of Schedule III of the SEBI (LODR) Regulations, 2015, listed entities are required to disclose the schedule of analyst or institutional investor meets at least two working days in advance. Furthermore, audio/video recordings of such calls must be disclosed to the stock exchanges and hosted on the company’s website within 24 hours (or before the next trading day), and written transcripts must be made available within five working days.

 Vector Alignment” is a concept most famously detailed in the book “The 15 Commitments of Conscious Leadership” by Jim Dethmer, Diana Chapman, and Kaley Klemp. it, it cannot sustain.

 https://nsearchives.nseindia.com/web/sites/default/files/inline- files/List%20of%20Companies%20under%20IBC%20and%20ICA_6.xlsx

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It is often remarked that Dhurandhar has changed the grammar of Hindi cinema. I would say, it has re-written the rulebook, not just bent it. When the industry was apprehensive about length, narrative style, and experimentation, the director chose conviction over convention and turned risk into legacy.

I am a learning from filmmaking – both as a science and as an art form. I consciously learn from cinema: direction, camera, storytelling, character arcs, sequencing, and the countless invisible choices a director makes. This film was not just watched, it was experienced, observed, and absorbed and lead to many learnings.

1. Experience is the real deliverable

A director like Aditya would have visualised every frame multiple times from the powerful introduction of Atik Ahmed to the final sequence where Jaskirat’s eyes narrate an entire emotional journey in silence without single dialogue.

That is not just acting – that is engineered impact.

Enhanced further by soulful music and grounded performances, the film reminds us – As professionals, we don’t just deliver services; we can design experiences. Be it an auditor, advisor, consultant, or speaker- what matters is:

• What does the client feel after interacting with us?
• What do they remember- not just what we told them, but what we made them experience?

Client experience is shaped by:

• Infrastructure (physical & digital)
• Presentation & storytelling
• Speed and clarity of communication
• Body language and sequencing
• And most importantly, the intention behind every interaction

Advice informs. Experience transforms.

2. Can we become the role we play?

Ranveer’s performance stands out; not because of dialogues,
but because of absence of them. His eyes, posture, and silence speak louder than words. Even when other actors get more “dialogue moments,”
he owns the character without demanding attention. He doesn’t play the role, he becomes it. This raises a powerful professional question:Do we perform our role… or do we inhabit it?

When we act as auditors, advisors, or consultants, Clients do not place their trust in titles; they trust authenticity. When an advisor internalizes their responsibility so deeply that their professional conduct becomes effortless, they move beyond a service provider to a trusted partner.

3. Know your audience. Speak their language.

Dhurandhar clearly understands its audience. It evokes nostalgia for some, relatability for others, and curiosity for newer viewers. It doesn’t broadcast – it connects.

As professionals, this is critical: Clarity of audience defines clarity of communication. We must ask:

• What does the client already know?
• What are their unasked questions?
• What narrative are they carrying—and what narrative do we need to reshape?

Our communication must adapt Style, Speed, Medium, Examples, Data vs storytelling balance.

Same message, different audience should lead to different delivery.

This film executes that brilliantly. For me, it was a reminder: relevance is the new intelligence.

4. Conviction over convention

Aditya challenges multiple norms regarding, film length, casting choices, narrative structure, real-life references, even the decision to continue the story long after the “expected ending.” He didn’t follow perception – he followed preparation-backed conviction and that is a powerful lesson. In professional life, conviction is your real currency. But conviction is not arrogance. it is:

• Built through research
• Strengthened by preparation
• Communicated with clarity

The rule is simple. Do not speak until you are convinced, and once convinced, do not remain silent – even if it goes against accepted perception.

Closing Thought

I can go on… but I’ll pause here with one reflection. There is a common saying, “God is in the details.” This film proves it. The level of detailing – from performances to transitions creates an experience that feels effortless, but is deeply engineered. Our profession demands the same. If we approach our work with depth, preparation, passion and attention to detail, we don’t just deliver outcomes, we create impact.

The post Dhurandhar – Not just a film… a masterclass for professionals first appeared on MMJC.

Contra trade is the one of the restrictions where compliance officer can grant relaxation. This statement itself is matter of debate and deliberation in corporate world.

SEBI (Prohibition of Insider Trading) Regulations, 2015 [PIT Regulations] has a very intelligent and unique structure. If you have UPSI you cannot share it unless it is need to know and legitimate purpose subject to certain compliances AND you cannot trade while in possession of UPSI. And then there are few more restrictions arising from model of code of conduct i.e. trading window closure, preclearance and contra trade.

Contra trade, in certain circumstances trade during window closure arising from pledge are few examples where compliance officer has power to grant certain relaxations.

What is contra trade?

As the word reflects there should be two trades and it should be contra i.e. opposite trades. Term trade is defined but contra is not defined. For example, buy and sell are opposite trades or sell and buy are opposite trades. Though trade includes pledge [give reference of definition] but when it comes to meaning of contra, SEBI has taken a view that unless because of trade beneficial ownership is changing it will not be a contra trade [though is considered as trade]. this is one fine line between ‘trade’ under PIT Regulations, and ‘contra trade’ under para 10 of model code of conduct. And this is very logical.

Power of Compliance Officer w.r.t. Contra Trade

In contra trade

1. the compliance officer may be empowered to grant relaxation from strict application of such restriction.
2. for reasons to be recorded in  writing
3. provided that such  relaxation  does  not violate  these  regulations

each of this condition is important, your code of conduct should empower compliance officer to grant relaxation for reason to be recorded in writing. However, he has to ensure that such relaxation does not violate these regulations.

Code of conduct must prescribe period, which in any event shall not be less than six months, within which  a  designated  person  who  is  permitted  to  trade  shall  not  execute  a  contra trade. Customarily companies keep same period of six months but not every company is conscious about providing authority to compliance officer to grant relaxation. In absence of such express power, it will be presumed that Compliance Officer has no power to grant any relaxation and legal consequence will follow.

Grounds under which relaxations can be granted

First and foremost, compliance officer must ensure that trade is not in violation of regulation. Violation of regulation would cover –

1. trades executed when person was not having any UPSI
2. trades not done when window is closed for him
3. trades are done either with proper pre clearance from compliance office OR transaction value should be below the threshold prescribed for minimum pre clearance.

Conservative view says if trade is executed within 6 months it will be presumed to be violative of regulations. However, there is legal doctrine which says that any interpretation which makes any line redundant is not a correct interpretation.

If compliance officer is satisfied about all above conditions, then subject to stipulations mentioned in code of conduct, compliance officer can grant relaxation subject to recording reason in writing. Stipulations mentioned in code of conduct can be some specific situations under which such relaxation can be granted by him for example –

1. Trade is not done while in possession of UPSI /or when trading window was closed OR not to override requirement of pre clearance
2. when there is no change in beneficial ownership like transfer between two where beneficial ownership is not changing OR
3. change is within immediate relatives or
4. change is within stipulated grounds narrated in proviso to regulation 4(1) of PIT regulations etc.

Code of conduct adopted by the company has to expressly empower Compliance officer and can give him some framework which he can adopt while granting relaxations. If code of conduct is silent about such power to compliance officer, he cannot grant any relaxation, and legal consequences will have to be followed. This power cannot be presumed; it has to be express in enough words in code of conduct.

Recording reason in writing

This is important that compliance officer records his reason in writing while granting relaxation. If relaxation is granted without recording reason in writing, compliance officer would be personally at fault and can suffer legal consequences.

Any power to grant relaxation from main rule must be exercised judiciously. And in order to prove that such exercise of power is not arbitrary it is in best interest of compliance officer to record full details and elaborate reasons why he/she feels that

1. trade is not done in violation of regulations; and
2. relaxation should be granted for the given case.

If compliance officer observes opposite trade within a period prescribed in code of conduct, it would be prudent for compliance officer to send notice/ communication explaining his observation and seeking response within some stipulated time with all back-ups as to why this should not be considered as violation of regulation and why no action should be taken.

Disgorgement of profit

Contra trade is one such restriction where apart from penal action which a company can take and report to stock exchange, it also has to disgorge profits made during that trade.

Para 10 of model code of conduct says – ‘Should  a  contra  trade  be  executed,  inadvertently  or  otherwise,  in violation  of  such  a  restriction,  the  profits  from  such  trade  shall  be  liable  to  be  disgorged  for remittance to the Board for credit to the Investor Protection and Education Fund administered by the Board under the Act.’

This clause is clear that whether trade is inadvertent or otherwise, profits shall be liable to be disgorged. Word ‘shall’ is important here. There is no discretion. Profits ‘shall’ be liable to be disgorged.

There are few more important words to be noted. It says ‘trade in violation of such restrictions’, we have seen in earlier para, it says compliance officer can grant relaxation if ‘trade is not in violation of these regulations’. When different words are used at different place it means different thing. And therefore, even if compliance officer observes that trade is not in violation of regulation but in violation of such restriction [for example 6 months] profits from such trade shall be liable to be disgorged.

Such disgorged profits will have to be remitted to Investor Protection and Education Fund [IPEF] administered by the Board under the Act. Though there is no timeline prescribed within which such disgorgement has to be done AND within what time such disgorged profits will have to be transferred to IPEF at the earliest. The word ‘shall’ makes it mandatory and therefore there is no reason why such disgorgement and transfer should be delayed. In fact, disgorgement is a concept which is triggered to avoid any siphoning of funds

What is considered as trade while ascertaining contra trade

Compliance Officer has to be mindful for evaluating whether there is contra trade or not, many type of transactions will have to be evaluated. Word trade is defined and therefore it includes buy, sell, pledge, un pledge, gift, off market transfer, lending of shares, shares offered as margin etc. the only exception is exercise of ESOP. Exercise of ESOP is not considered as trade for the purpose of these regulations. SEBI in its frequently asked questions have given elaborate guidance on contra trade in context of ESOP as discussed above trade which triggers change in beneficial ownership and is opposite in nature only will be considered as contra trade

Conclusion

While dealing with contra trade compliance officer has to be mindful about various aspects. While model code allows companies code to empower compliance officer to grant relaxation from contra trade restrictions, as per definition of ‘compliance officer’ he is personally responsible to ensure compliance with code. And therefore, he has to be mindful about this.

 For example, entering into confidentiality agreement or notice, entering details in SDD and closing window for the recipient’s

 Regulation 4 of SEBI (Prohibition of Insider Trading) Regulations, 2015

 The compliance officer may be empowered to grant relaxation from strict application of such restriction for reasons to be recorded in writing provided that such relaxation does not violate these regulations.

 “trading” means and includes subscribing, redeeming, switching, buying, selling, dealing, or agreeing to subscribe, redeem, switch, buy, sell, deal in any securities, and “trade” shall be construed accordingly ;

https://www.sebi.gov.in/enforcement/informal-guidance/nov-2025/in-the-matter-of-welspun-corp-limited-under-sebi-prohibition-of-insider-trading-regulations-2015-_97595.html

 ut res magis valeat quam pereat (the thing may rather have effect than be destroyed)

 Maxwell on the Interpretation of Statutes, 12th edn, page 282 and Oriental Insurance Co. Ltd. v. Hansrajbhai v. Kodala [2000] 105 Comp Cas 743 (SC); 001 AIR SCW 1602;AIR 2001 SC 1832

 Khub Chand v. State of Rajasthan AIR 1967 SC 1074; Lalita Kumari v State of U. P. AIR 2014 SC 187.

 SEC vs First City Financial Corp. Ltd 890 F.2d  1215,  1230  (D.C.Cir.1989 – Disgorgement primarily serves to prevent unjust enrichment.  

 “trading” means and includes subscribing, redeeming, switching, buying, selling, dealing, or agreeing to subscribe,redeem, switch, buy, sell, deal in any securities, and “trade” shall be construed accordingly ;

https://www.sebi.gov.in/enforcement/clarifications-on-insider-trading/dec-2024/comprehensive-faqs-on-sebi-pit-regulations-2015_90403.html

https://www.sebi.gov.in/enforcement/informal-guidance/nov-2025/in-the-matter-of-welspun-corp-limited-under-sebi-prohibition-of-insider-trading-regulations-2015-_97595.html

 “compliance officer” means any senior officer, designated so and reporting to the board of directors or head of the organization in case board is not there, who is financially literate and is capable of appreciating requirements for legal and regulatory compliance under these regulations and who shall be responsible for compliance of policies, procedures, maintenance of records, monitoring adherence to the rules for the preservation of unpublished price sensitive information, monitoring of trades and the implementation of the codes specified in these regulations under the overall supervision of the board of directors of the listed company or the head of an organization, as the case may be.

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Here is how we move beyond the checklist to a contemporary, “Compliance by Design” framework. In alignment with vision of Viksit Bharat by 2047, it’s a time when collectively Independent Directors, KMPs, Institutional Investors, Regulators, Promoters will have to demonstrate higher integrity to attract better valuation and also bring more sustainability to company.

1. Mapping the Human Matrix

Every framework assumes people act rationally, but they actually act according to their own motivations. When we fail to map these stakeholders, we miss the risks hidden in plain sight.

• The “Shadow” Power Structure: A promoter might hold stakes in multiple similar businesses. Even with perfect paperwork, there is an inherent risk of “value shifting” or strategic bias that a standard audit might miss[1]. Or when the entity is one of the piece of the whole value chain which promoter owns via multiple companies, one needs to be mindful of this risk.
• The Governance Paradox: When one person holds the roles of both Chairman and MD, the board’s ability to challenge senior management or evaluate pay becomes a formality rather than a check[2].

Think of the Satyam scandal or more recent fintech collapses. On paper, the boards were populated with experts; in reality, the concentration of power made dissent a “career-ending move”, rendering the compliance framework an illusion. And therefore many good professional or Independent Director and even institution insist, though not mandatory, to have single structure in group for one business and separation of chairman and management. This systemically reduces risk. Overall we as community, will have to look at compliance from Human matrix.

2. Incentives Drive Behavior, Not Manuals

Policies assume people will follow the rules; incentives determine what they actually do. “People do not violate policies; they follow incentives”.

In the age of “hyper-growth” startups, the pressure to reach unicorn status often created an incentive structure where “breaking things” is rewarded more than building them correctly, making compliance the enemy of speed. Many successful and sustainable corporates take cognizance of incentive based human behaviour and structure their engagements, evaluation, compensation to eliminate such risks.

3. The “Silo” Tax: Where Compliance Breaks Silently

Compliance often fails at the point of coordination, not at the point of law. When departments don’t talk, risk leaks through the cracks.

• Insider Trading (PIT): The Compliance team might have a great policy, but if the Business team or an outside consultant leaks Unpublished Price Sensitive Information (UPSI) because they weren’t “sensitized,” the policy is useless. And sometimes sensitization may need a louder action to demonstrate what organisation stands for.
• The Onboarding Gap: If HR, Legal, and Compliance don’t align during the hiring of Senior Management or Key Managerial Personnel (KMP), background checks and independence assessments remain incomplete. And if their assessments are relied upon by Independent Directors without being sceptical about process, controls and independent check, it can create disaster. In one of the recent cases KMP was alleged to have been on payroll of some group company, which is against principle of exclusive commitment expected from KMPs.

Consider Global Data Breaches. Often, the IT department knows about a vulnerability, but because they aren’t integrated with the Legal/Compliance reporting chain, the “disclosure failure” happens long before the regulator finds out.

Increasing cross functional team meets, more integrated KPI, KRA and reward recognize mechanism is the need of hour.

4. Designing Policies for the Real World

A policy that ignores how people actually act is just a document; a policy that reflects behavior becomes governance.

• Integrated Workflows: If compliance depends on different departments (like RPTs requiring Procurement, Marketing and Sales, HR, Finance, and Compliance), the policy must mandate a single, integrated digital workflow rather than three isolated tools/ systems. Gone are the days when operations used to say that RPT is responsibility of compliance team and we have nothing to do about it OR claiming disclosure is compliance requirement and not flagging the probable event is not my responsibility. Compliance cannot happen without integrated effort, system and accountability.
• Managing Tension: Don’t ignore the tension between ESOP encashment and Insider Trading rules—address it head-on with automated black-out periods and robust pre-clearance triggers.

Compliance team with the support of top management team should design policies and structures to navigate everyone on desired track.

5. Intelligent Supervision and Correction

You cannot achieve result of integrated compliance without adequate supervision and correction.

• Intelligent Supervision: This isn’t “inspection”; it’s the intelligent observation of patterns, predict changes in behavioral pattern which can trigger because of change in situations and accordingly re-structure your systems or increasing supervision typically for a situation. For example if new company is getting acquired or incorporated it will require support from related parties, or if any company is financially weak it will break RPT approval conditions, or when your CSR obligation increases suddenly, ability to cope up will take some time. In such situations compliance needs to be more mindful and alert.
• Continuous Correction: As the business evolves, the policy must evolve. If your risk profile changes (e.g., moving into a new market), your behavior-mapping must start over. Sustainability requires a PDCA (Plan–Do–Check–Act) cycle. Compliance department has to adopt many best practices from matured processes like ISO, Six Sigma and many other frameworks.

The Closing Thought

True compliance isn’t about ensuring nothing ever goes wrong—it’s about ensuring that nothing can go wrong unnoticed. To get there, we must stop building checklists and start engineering environments where integrity is the path of least resistance.

[1] there is no merit in the plea of appellant that the business allocation cannot be treated as a transaction, tantamounting to a RPT under Regulation 2(1)(zc)… business allocation will result in losses or/and gains in different geographies and product-lines which will have a definite value impact…In case such a value exceeds the materiality threshold as in Regulation 23(1), the appellant would be required to obtain the shareholders’ approval. – SAT order in the matter of Linde India Ltd vs SEBI, December 5, 2025.

[2] SEBI adjudication order in the matter of SCAL Services ltd. – October 21, 2022

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