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Querist : Anonymous

Querist : Anonymous (Querist)

29 August 2013 Hi,

Our company "X cements ltd" is utilising the transport services of "Y carriers pvt Ltd". The directors of "Y carriers pvt ltd" are relatives to the director of "x cements ltd".

Do the provisons of Sec.297 applicable to the above case and what are the consequences of non compliance

Ajay Mishra

Ajay Mishra (Expert)
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29 August 2013 Hi

Section 297 does not apply to:

1. Giving or taking loans.
2.Contract in respect of immovable property (as it is not 'good' ).{Letter No. 9/4190-CL-X dated 27.03.1990}.
3.Contract between two public Companies.
4.Contract of employment of director or managing or whole time director.[ Circuler No.8/11/75-CL-V dated 27.03.1975]
5.Contract for employment of relative of director.
6.Contract entered into by the company with the dealer on principle to principle basis. [Circuler No. FM 8/297/56-PR dated 02-08-1956]
7. Professional services of the nature given by firms of solicitors and advocates, etc.[circuler No. 8/11/75-CL-V dated 05.06.1975]
8.hiring of office premises on rent as the transaction is in immovable property. [Department Clarification dated 10-09-1990]

In all other cases, section 297 will apply.

Ajay Mishra

Ajay Mishra (Expert)
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29 August 2013
Persons covered u/s 297

The followings are the persons with whom a company cannot enter into contracts without the consent of the Board of directors and prior approval of the Central Government is required in case if the paid up capital of a company is not less than Rupees One Crore:—
(i) director of the company;
(ii) relative of such director;
(iii) a firm in which such director is a partner;
(iv) a firm in which relative of such director is a partner;
(v) any other partner of such firm in which such director is a partner;
(vi) any other partner of such firm in which relative of such director is a partner;
(vii) a private company in which such director is a member or director.

Exemptions under section 297(2) in certain cases:

The prior consent of the Board or Central Government will not be required in the following circumstances:—
(i) Contract for purchase of goods from the company or sale of goods to the company, which are for cash at prevailing market prices.
(ii) Contract for sale or purchase of goods and services in which the company or other party regularly does business but upto Rs. 5,000 in a year during the period of the contract.
(iii) Any transaction of a Banking/Insurance Company in the ordinary course of business of such company with the specified persons.

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