Sec 297

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This query is : Resolved

Abhijit Rane (Querist)

02 May 2012
Dear All,

Our Company has entered into a transaction as on 31st March 2012 for purchase of machinery which triggers sec 297 of the Co. Act. the paid up capital of our company is more than one crore. but we have not yet made the application to the central govt.

whether we can take the defence that the transaction was executed under an exigency and hence can we make an application within 3 months of from the date of approval of the board that is 31st march 2012.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)

03 May 2012 No we can not. Section 297(3) says " Notwithstanding anything contained in sub-sections (1) and (2) a director, relative, firm, partner or private company as aforesaid may, in circumstances of urgent necessity, enter, without obtaining the consent of the Board, into any contract with the company for the sale, purchase or supply of any goods, materials or services even if the value of such goods or cost of such services exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract; but in such a case, the consent of the Board shall be obtained at a meeting within three months of the date on which the contract was entered into."

This three month benefit is given only where Board's Consent is required. Therefore, prior consent of central government will have to be obtained.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)

03 May 2012 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.

Abhijit Rane

Abhijit Rane (Querist)

03 May 2012 Thank you Sanjay..

we have obtained Board approval. and the consideration is paid in cheque. how do v acertain the market price. whether it is the price of similar goods sold in the market??

plz resolve.

Regards,
Abhijit

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