Sec 297-specified contarcts with specifed persons

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Biju P (Querist)
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17 December 2011 It has been provided in Sec 297 that Central Govts prior approval is mandatory when the paid up capital of a company is more than or equal to Rs.1 Crore. Sec 297 is relating to the the specified contarct between specified persons.Whose paid up capital needs to be considered for the priopr approval. Whether the contractor company or contratctee company. For example when the paid up capital of X Ltd company is less than 1 crore but the contrctee co Y Private Limited co having paid up capital of Rs.2 Crore. Do the X Ltd is required the prior aproval or Y Ltd . Assumed that both companies having same Director.

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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17 December 2011 central government approval is required only for X ltd if paid up capital of that company exceeds Rs.1Crore not the contractee.

In your case non of the companies required to get prior approval from C.G.

Guest

Guest (Expert)

17 December 2011 Company Y is required to take approval of CG u/s 297.

Charu Srivastava

Charu Srivastava (Expert)
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17 December 2011 Agree with Neha...
X is not required to obtain CG approval since the paid up is less than 1 Crore.

IN case of Y , CG approval is required.

However CG approval can be done away with if the purchase of goods and materials from the company, or the sale of goods and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices section 297(2)(a) of companies Act, 1956.

Thanks

Charu

Charu Srivastava

Charu Srivastava (Expert)
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Jiten Gupta

Jiten Gupta (Expert)
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30 December 2011 try to understand the meaning of interested Director. If a Pvt Ltd Company is Contracting Public ltd and both companies has paid up capital equal to or more than 1 crore, public Ltd Company is required to take CG approval.

But in ur case No company is required to take CG approval because public ltd company has less than 1 Crore paid up capital..

CHARU plz check the meaning of interested Director, may be i am wrong but plz CONFIRM??

Other Views are welcomed..,

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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02 January 2012 Agreed with Jitendra

Section 297 would apply where one of the two companies being parties to the contract is a private company and other is a public company, but in such a case , it will have to be complied with by the public company.

In your case

X LTD - Paid up capital - Less than 1 crore
Y PVT. LTD- Paid up capital 2 crores.

Section 297 applies only to Company X LTD
and X Ltd require Board Consent only & not Central Government's previous approval as paid up capital is less than 1 crore.

Guest

Guest (Expert)

02 January 2012 Dear Mitesh,

Section 297 is applicable when a private company enters into contract with any other company (whether it is PRIVATE OR PUBLIC COMPANY).

In this case, under section 297 CG approval is required when paid up capital of X company is more than 1 Crore. It is not necessary that X company should be public company. X company can be public or private company but Y company should be necessarily Private limited.

Hence X PVT LTD is required to take board consent and CG approval is paid up capital is more than 1 Core.

Jiten Gupta

Jiten Gupta (Expert)
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02 January 2012 Here X is a Ltd co. and Y is Pvt Ltd Company in the Above Questions.
X Ltd Has Paid Up Cap- Less than 1 Crore
Y Pvt Ltd has Paid Up above 1 Crore.

Now X ltd is not required to have Prev. approval of CG.

But Y is a Pvt Ltd Company but is entering into contract with X ltd.(Public comp.)

So Not required to take Prev. approval of CG.