Sec. 297 of the companies act

This query is : Resolved

Mahesh (Querist)
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03 August 2013 Hi,

I understand that the provisions of Section 297 of Companies Act is not applicable if the paid up capital is less than Rs.1.00 cr. at the time of entering into contract.

In the following years, the Company has increased its paid up capital beyond Rs.1.00 cr. and the above contract is still in existence without any modification to the original contract.

Subsequently after 5 years, the contracting company is to terminate the contract and at this stage the paid up capital in morethan Rs.1.00 cr.

Experts, please advise, whether the RD approval is required for terminating the contract where the paid up capital is more than Rs.1.00 cr.

Regards,

D.Mahesh

Ajay Mishra

Ajay Mishra (Expert)
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03 August 2013 No requirement of approval in case of change in the circumstances:

If at the time of entering into the contract, no approval of Central Government is required then no subsequent approval is to be obtained though section 297 becomes applicable due to any of the following reasons:—
(a) The company's paid up share capital is enhanced to Rupees One Crore or more.
(b) The contracting person occupies any of the position stated above.
(c) The public company is converted into a private company. If the companies between which contract is entered into are public companies and later on one or both the companies are converted into private companies.

However, any modification is made in the terms of contract or it is renewed after the expiry of its original period, previous approval of the Central Government would become necessary.

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