(1) Every director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year, or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any body corporate, which shall include shareholding, in such manner as may be prescribed.
(2) Every director who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into by the Institution--
(a) with a body corporate in which such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, chief executive officer or trustee of that body corporate; or
(b) with a firm or other entity in which such director is a partner, owner or member, as the case may be,
shall not participate in any meeting of the Board or of its committee in which such contract or arrangement is deliberated upon, or in any other deliberations or discussions regarding such contract or arrangement, and shall, in the case of such deliberations in a meeting of the Board or its committee, disclose the nature of his concern or interest to the Board or the committee, as the case may be:
Provided that where any director who is not so concerned or interested at the time of entering into such contract or arrangement, shall, if he becomes concerned or interested after the contract or arrangement is entered into, disclose his concern or interest forthwith when he becomes concerned or interested, or at the first meeting of the Board held after he becomes so concerned or interested.
(3) A contract or arrangement entered into by the Institution without disclosure under sub-section (2) or with participation by a director who is concerned or interested in any way, whether directly or indirectly, in such contract or arrangement, shall be voidable at the option of the Institution.
(4) Such employees as the Board may specify as constituting the senior management of the Institution shall make disclosures to the Board relating to all material, financial and commercial transactions, in which they have personal interest that may have a potential conflict with the interest of the Institution, and the Board shall formulate a policy on such transactions, including any materiality threshold therefor, and shall review such policy at least once every three years.
Explanation.--For the purposes of this sub-section, conflict of interest relates to dealing in the shares of the Institution or any of its subsidiaries or associate companies, commercial dealings with bodies in which the senior management individual or his relatives have shareholding, etc.
(5) If an individual who is a director contravenes the provisions of sub-section (1) or sub-section (2), or an employee referred to in sub-section (4) contravenes such provisions, such an individual or employee shall be liable to pay penalty of a sum of up to one lakh rupees.
(6) Without prejudice to anything contained in sub-section (5), it shall be open to the Institution to proceed against a director or any other employee who had entered into such contract or arrangement in contravention of the provisions of this section for recovery of any loss sustained by it as a result of such contract or arrangement.
Explanation.--For the purposes of this section and section 19, the expression "body corporate" shall include a company, a body corporate as defined in clause (11) of section 2 of the Companies Act, 2013 (18 of 2013), a firm, a financial institution or a scheduled bank or a public sector enterprise established or constituted by or under any Central Act or State Act, and any other incorporated association of persons or body of individuals.