Applicability of Sec 297

Dear Mam,

Pls ignore this - I misread the question as commission is payable by PQR Pvt. Ltd.

I think in the present case Sec 297 will not be attracted since as u have mentioned that Mr. X  is not a member/director in the PQR Pvt. Ltd.

In this case Sec 299 gets attracted & Mr. X is required to disclose his interest.

Attention is invited to the fact that Sec 300, which debars the interested director for the purposes of quorum & voting shall not apply in this case since that section does not apply to a private company.

Dear Friend,

My query is since there is an implied contract between ABC Pvt ltd and Director X, then does in that case Sec 297 become applicable as Mr. X is procuring services from PQR for ABC Pvt Ltd and ABC Pvt ltd in turn is paying commission for his services to the co in lieu of remuneration?

Sorry for the above reply...

Ok lets do it this way that for applicability of 297 what is required is -

1) Specified persons - Director is one of them, so this condition gets fulfilled.

2) Contract should be in respect of -

(a) for the sale, purchase or supply of any goods, material or services; or

(b) after the commencement of this Act, for underwriting the subscriptttion of any shares in, or debentures of, the company.

Now we need to see that whether in the present case, can it be said that Mr. X is supplying service - "Getting the business"?

Now my doubt comes from the thing that you have stated above that this transaction is independent of the contract & the commission will be paid in lieu of his remuneration.

Considering the above facts I think this is just an alternative manner of discharging the Director's remuneration and cannot be considered as a  SEPARATE / NEW contract.

I would say it is just a modification in the earlier contract with the director in respect of his remuneration.

Now another question, which is to be answered is - are modifications of earlier contracts covered u/s 297?

I think Yes otherwise it will defeat Sec 297..

Further, Sec 299 shall apply in any case

Originally posted by : Amir
	Dear Mam, I think in the present case Sec 297 will not be attracted since as u have mentioned that Mr. X  is not a member/director in the PQR Pvt. Ltd. In this case Sec 299 gets attracted & Mr. X is required to disclose his interest. Attention is invited to the fact that Sec 300, which debars the interested director for the purposes of quorum & voting shall not apply in this case since that section does not apply to a private company.

Perfect observation !!!

Section 297 is not applicable to the case...

Section 299 along with 301 is applicable from the very beginning.

Hi Amir/Ankur,

I have query!!

Public ltd co has taken over the private Ltd on March 2010.Both comapny has same directors before such Taken over.and The Public Ltd Co., Paying all Remuneration,Salary to that Private Ltd Co.,

My Query is Will this section 295 apply if the Co., continues to Pays all the Salary,Remuneration and Loan to its directors after such Take Over ??

If the Company has prior Contract to pay Such Loan and Salary to Private Ltd co., Will that be enough to avoid Cg approval after Take over??