SEBI vs. R.T. Agro (P.) Ltd.: Critical Analysis in RPT
Keywords:
Related party transactions, corporate governance, Indian companiesAbstract
Related party transactions are those that take place between a business and its own management, directors, primary owners, or affiliates. These transactions, which are varied and frequently complex, provide a problem for corporate governance. SEBI was unjustified in punishing a Company by adopting an overly technical interpretation of the legislation on related party transactions. The Securities and Exchange Board of India vigorously regulates and oversees the Indian financial markets. However, there have been other instances in recent years where SEBI's enforcement measures have been questioned. This important decision highlights the value of balanced regulatory monitoring and the necessity to guard against regulatory authorities going beyond their authority. This study launches related party transactions as a topic for financial research. These transactions are efficient transactions
that satisfy a company's logical economic requirements while creating conflicts of interest that jeopardise management's duty to shareholders and directors' oversight responsibilities. Regulations regulate these kinds of transactions and stop their misuse. This study looks at the effects of stricter regulations that were implemented in India for listed businesses' RPT disclosure.
References
SEBI vs. R.T. Agro (P.) Ltd civil appeal 2957, 2022.
ICSCI Guidance Note on Related Party Transactions, pf.7 of 100.
CFA Society India. (2020). 2019-2020 ANNUAL REPORT serving the community by promoting
Financial Literacy CFA Society India, promoting financial literacy to the community. [Online]
Available from: https://cfasocietyindia.org/wp-content/uploads/Media-Uploads-Regulatory-
Disclosures/IAIP-AGM-2019-20/IAIP-Annual-report2019-20_Annual-report.pdf.
Supra n1.
Ibid.
Ibid.
Organisation for Economic Co-operation and Development. Related Party Transactions and
Minority Shareholder Rights. Paris: OECD Publishing; 2012. doi:10.1787/9789264168008-en.
ICSI. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A Referencer
SEBI (LODR) Series – Debt Securities. New Delhi: The Institute of Company Secretaries of India
(ICSI); 2016.
Indian Accounting Standard (Ind AS) 24 Related Party Disclosures contents paragraphs objective
scope 2-4b purpose of related party disclosures 5–8 definitions 9–12 disclosures All entities 13–
A Government-related entities 25–27 illustrative examples appendix 1 Comparison with IAS 24,
Related Party Disclosures. [Online]. [cited 2023 Aug 9]. Available from: https://www.mca.gov.in/
Ministry/pdf/Ind_AS24.pdf
Shrimi Choudhary. (2020 Feb 21). SEBI Probe Finds Violation of Listing and Disclosure Norms
by Sun Pharma. [Online]. Business Standard.
Ibid
SEBI. (2020). Report of the Working Group on Related Party Transactions. [Online]. SEBI. [cited
Aug 9]. Available from: https://www.sebi.gov.in/reports-and-statistics/reports/jan-
/report-of-the-working-group-on-related-party-transactions_45805.html
Section 188(1) of the Companies Act.
Regulation 2(zc) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,
Section 188 (2) (zc).
Section 188 of the Companies Act and Regulation 23(7).
Afza T, Nazir MS. Role of Institutional Shareholders’ Activism in Enhancing Firm Performance:
The Case of Pakistan. Glob Bus Rev. 2015; 16(4): 557–570.
Khan A, Yusof Z. Terrorist economic impact evaluation (TEIE) model: the case of Pakistan. Qual
Quant. 2017; 51(3): 1381–1394.
Williams MP, Taylor DW. Measuring and Explaining the Extent of Corporate Propping
Transactions: Evidence from China. Global Review of Accounting and Finance. 2014; 5(1): 76–92.
Javaid F, Saboor A. Impact of Corporate Governance index on Firm Performance: evidence from
Pakistani manufacturing sector. Journal of Public Administration and Governance (JPAG). 2015;
(2): 1–21.
Gordon EA, Henry E. Related party transactions and earnings management. SSRN Electronic
Journal. 2005.
Amzaleg Y, Barak R. Ownership Concentration and the Value Effect of Related Party Transactions
(RPTs). J Mod Acc Aud. Feb 2013; 9(2): 239–55.
Kohlbeck M, Mayhew BW. Valuation of firms that disclose related party transactions. J Account
Public Policy. 2010; 29(2): 115–137.
Gopalan R, Jayaraman S. Private control benefits and earnings management: evidence from insider
controlled firms. J Account Res. 2012; 50(1): 117–157.
Padmini Srinivasan. An Analysis of Related Party Transactions in India. IIM-Bangalore, Working
Paper No. 402. 2013; 3.
Tambunan ME, Siregar H, Manurung AH, Priyarsono D. Related Party Transactions and Firm
Value in the Business Groups in the Indonesia Stock Exchange. J Appl Financ Bank. 2017; 7(3):
–20.
Mehboob F, Tahir SH, Hussain T. Impact of Family Ownership on Financial Decisions of a Firm:
An Analysis of Pharmaceutical and Chemical Sectors in Pakistan. Euro-Asian J Econ Financ. 2015;
(2): 103–112.
