Introduction
A statutory duty on company directors to disclose personal interests to their board is imposed via Section 184 of the Companies Act, 2013. A disclosure rule that has its lineage in Section 299 of the erstwhile Companies Act, 1956. This article traces the origins and evolution of that disclosure duty from the 1956 Act to the 2013 enactment and examines how Indian courts have interpreted the provision over time. In particular, it critically examines the recent National Company Law Tribunal (Mumbai Bench) decision in Mr. Diven Dembla v. Precision Rubber Industries Pvt. Ltd. & Ors., where it is held that a director’s duty to disclose interest can be satisfied by knowledge of that interest within the board, even if the director personally did not announce it. We assess the reasoning of this ruling in light of the statute’s text, principles of statutory construction and fiduciary duty, and we consider its potential implications for corporate governance. Finally, recognizing the doctrinal debates stirred by this case, we suggest possible clarifications, whether by judicial guidance, regulatory rule-making or legislative amendment, to reconcile transparency objectives with practical board dynamics.
Statutory Framework: From Companies Act, 1956 to 2013
The Companies Act, 1956 codified directors’ duty to disclose “interests” in Section 299–301, with Section 283 providing for vacation of office on breach. Section 299 required disclosure at board meetings; s.300 barred interested directors from voting; and s.301 required keeping a register of such contracts and Non‑disclosure was punishable by fine. In Avanthi Explosives Ltd. v. Principal Subordinate Judge (1987), the Andhra Pradesh High Court held that this disclosure duty is akin to a trustee’s fiduciary obligation.
Under the Companies Act, 2013 Act the framework is retained and expanded. Section 184 likewise mandates prompt disclosure of any direct or indirect interest, using Form MBP-1 to record it. Section 167(1)(c) provides that failing to disclose under s.184 causes automatic vacation of office. Crucially, s.188 now rigorously regulates related‑party transactions – requiring board approval (and, for larger deals, shareholder approval) for specified contracts. Thus the modern regime builds on the 1956 framework, shifting from basic disclosure‐and‐fine rules to a detailed compliance regime with stronger oversight.
Judicial Interpretations under the 1956 Act
Early Jurisprudence: Conflicting Notions of “Disclosure”
Decades of case law under the 1956 Act reveal two competing doctrines on what it means to “disclose” an interest. One line exemplified by T.K. Bose v. Sree Venkatesha Electrical Industries (Karnataka CLB 1985) held that Section 299 must be literally enforced: formal disclosure must be made in the board minutes, irrespective of whether the other directors already knew of the interest. In T.K. Bose, for example, the plaintiff (director) had indeed revealed his interest in a sister company at the first board meeting, but the minutes recording that disclosure were “woefully scanty”, the chairman merely noted “not to make a fetish” of it. When the other directors later ousted him for alleged non-disclosure, the Board held that, while the plaintiff had verbally revealed his interest, non-compliance in form could not defeat the statute. The CLB invalidated the resolution removing him, emphasizing that Section 299’s object “is not that a director should not have any personal interest, but only stipulates that the same should be disclosed,” and that this means “to make others aware of something which they are not aware of”. On those facts, T.K. Bose found the disclosure requirement satisfied in substance, but it also underscored that a bare assertion by a director that “others knew already” would be insufficient. Thus, T.K. Bose leaned toward formalism: the rule could not be dispensed with by mere consensus of knowledge.
By contrast, another line of cases took a more pragmatic view, in a 1970 Mysore High Court case, Ramakrishna Rao v. Bangalore Race Club had already held that if all directors are aware of a fellow director’s interest, requiring formal disclosure would be futile. The Andhra Pradesh High Court in Avanthi Explosives Ltd. v. Subordinate Judge (1987) likewise analogized directors to trustees and emphasized fiduciary obligations, but did not bind them to needless ritual where facts were already known. The Company Law Board in A. Sivasailam v. Registrar of Companies (Madras CLB 1994) expressly adopted a functional interpretation: it defined “disclosure” as making others aware of what they were not already aware, citing Ramakrishna Rao, and held that when board members “are otherwise generally aware of the interest of a director,” non-disclosure at the meeting would not attract penalties. Similarly, Suryakant Gupta v. Rajaram Corn Products (Punjab) Ltd. (CLB 2001) involved a family-run board with overlapping interests. Relying on Sivasailam, the CLB found that because all board members were family partners and aware of the interested director’s stake, failure to minute the disclosure did not trigger disqualification.
Finally, Ravi Raj Gupta v. Hans Raj Gupta & Co. firmly endorsed this “knowledge doctrine”. There, the court emphasized that in a closely-held family firm “all the Directors know each other’s interests,” so “the question of non-disclosure does not arise.” It explained that “Section 299, does not require ritualistic formality” when everyone already knew the facts. Quoting Sivasailam, the court dismissed the suit challenging a board resolution on the ground that, although disclosure had not been formally recorded, the interests of all concerned were well-known to the board. The Delhi High Court even cited the CLB’s conclusion that if directors know of a colleague’s interest, “the question of further disclosure does not arise”.
These authorities underscore an early tug-of-war: strict literalists versus purposive pragmatists. On one side, cases like T.K. Bose highlighted that Section 299’s binding effect should not be diluted by informal understandings. On the other, decisions like Sivasailam and Ravi Raj took the view that the underlying legislative purpose, preventing undisclosed conflicts, was achieved if directors were openly cognizant of the matter. For fifty years, both currents coexisted without definitive Supreme Court arbitration. When Section 184 was enacted in 2013, courts had already somewhat acknowledged the “knowledge as disclosure” principle. But the strict versus liberal debate persisted into the new Act’s regime.
Section 184 under the Companies Act, 2013: New Issues and Interplay
The transition to the 2013 Act largely continued pre-existing rules but introduced changes that make disclosure even more consequential. First, the text of Section 184(2) closely echoes old Section 299, still requiring the participating director to make the disclosure in board meetings. However, Section 184(1) on annual disclosure is a new add-on. Crucially, Section 167(1)(c) of the 2013 Act automatically vacates a director who contravenes Section 184(1) or (2). Unlike in 1956 (which required a separate show-cause and was only one ground of vacation), this imposes immediate disqualification. The penal provision was also beefed up to imprisonment (though rarely invoked). Section 184(3) now expressly voids contracts entered without the disclosure, whereas under Section 299 the remedy was vacatur under Section 283. In sum, non-compliance under the 2013 regime has harsher and more immediate effects.
Another new dimension is the detailed procedure: the Companies (Meeting of Board) Rules, 2014 prescribe Form MBP-1 for directors to file their disclosures annually. Thus, unlike in 1956, there is now an exact format and public filing requirement as MBP-1 is available for inspection under Section 189(3). Indirectly, this buttresses the text: if a director’s duty were simply to ensure that everyone is aware of his interest, the need for official forms would be undermined.
Given this robust scheme, it is unsurprising that courts have enforced Section 184 strictly. The Supreme Court in Tata Consultancy Services v. Cyrus Investments noted that failure to disclose an interest can go to validity of a company’s actions, citing Sections 184 and 177. However, detailed appellate precedents under the 2013 Act have been sparse until very recently. Most commentary focuses on compliance checklists. In practice, the formalism from 299 jurisprudence carried over: company secretaries routinely insist on individual declarations and board minutes. Yet the knowledge-doctrine had gained some foothold in CLB and HC rulings prior to 2013, and it lay dormant for the 2013 Act until the NCLT’s intervention.
The NCLT Mumbai Bench’s Ruling in Diven Dembla v. Precision Rubber Industries (2025)
Background of the Case
In Diven Dembla (June 25, 2025), two interlinked family factions (the Dembla and Thakkar families) each holding shares in Precision Rubber Industries were locked in oppression-and-mismanagement proceedings. The dispute centred on related-party purchases from Aarya Machines LLP, linked to director Niraj Thakkar. The Dembla family alleged these were unauthorised RPTs entered without disclosure under Section 184(2) and without filing Form MBP-1; the Thakkars maintained that all directors were aware of Niraj’s connection. The Company Law Board and NCLT had earlier held Niraj’s removal illegal and declined to bar him for non-filing. The Tribunal, following the Delhi High Court in Ravi Raj Gupta and the “knowledge” rule, held that collective board awareness on a family-run board and given ordinary-course, arm’s-length dealings satisfied Section 184’s disclosure obligation in substance despite no formal MBP-1 entry.
Expansion of Duty to “Aware” Directors
Most controversially, the NCLT found that the disclosure duty can be met by the knowledge of other directors. This implies that any director who knows of a colleague’s conflict effectively participates in the disclosure by acknowledgment, even if he himself has no personal interest to report. In other words, a director who is aware of another director’s interest bears some responsibility: if he remains silent but already knew, the statute is deemed complied with. This is a marked broadening: neither Section 184’s language nor earlier authority explicitly imposed an affirmative duty on “aware” directors. The Tribunal effectively held that the statutory scheme contemplates situations where formal announcement is superfluous if the board is already informed by other means.
By attributing the disclosure function to collective board awareness, the NCLT thus expanded the scope of Section 184 beyond its literal terms. Under a strict reading, Section 184(2) speaks only of the interested director (or concerned directors) making the disclosure and abstaining; there is no textual requirement for any other director to do anything except not vote if also interested. The Tribunal’s view transmutes the concept of disclosure from a unipersonal act into a collective fact. Even the earlier knowledge doctrine cases (e.g. A. Sivasailam, Ravi Raj) spoke of disallowing penal consequences for the interested director when others knew; they did not pronounce that the others now owed some new obligation. Thus, by suggesting that board knowledge counts as disclosure, the judgment pushes the envelope on directors’ statutory duties.
[continued in next part]
(This post has been co-authored by Abd
CITE AS: Abd