Section 297, 299

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pnayal (Querist)

03 November 2012 thanks sir, please let me know that which types of contracts covered under section 299,297 which are entered in the register maintained by under section 301.

Ajay Mishra

Ajay Mishra (Expert)

03 November 2012 Hi

The word "interest" occurring in sections 299 and 300 means personal interest. It is limited to financial interest only but may include interest arising out of fiduciary duties and closeness of relationship. In short, the interest should be an "interest" conflicting with duty of a director. [Makkatukara Catholic Co. Ltd. v Thomas (M. V.) (1995) 6 SCL 135: (1996) CLA 348 (Ker)].

Sections 297 and 299 regulate the transactions in which the directors are deemed to be interested. Section 297 requires disclosure of interest of a director and previous approval of the Board before the company enters into a contract in which a director may be interested. Section 299 which is extensive and wider in scope, requires disclosure by the director concerned whenever he is concerned directly or indirectly in any contract or arrangement.

Applicability

Section 297 is applicable to all companies whether public or private. [Subhash Chand Agrawal v Associated Lime Stone Ltd. (1998) 92 Comp Cas 525].

Scope of section 297

Section 297 of the Act embodies the principles of good faith and fiduciary relationship of a director and enjoins upon him certain statutory obligations. Section 297(1) states that a company cannot enter into contracts with the specified persons without the consent of the Board. These types of contracts are:—
(a) sale, purchase or supply of any goods or materials or services;
(b) underwriting the subscription of any shares in or debentures of the company.

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