Companies Act Section 297

Hi Srinivas

Sec 297 of the companies act deals with certain contracts in which particular directors are interested . So for attracting sec 297 interest of directors are required. Acc to sec 299 of the companies act,Interested director means any director whose presence cannot, by reason of his being interested in some manner in the subject matter of discussion be counted for the purpose of forming a quorum at a meeting of the Board, at the time of the discussion or vote on any matter.....

So if you interperate the provision its clearly stated that if they have a interest in any manner as they are director in both the company they got a interest ....so i bel sanction of cg is required.

Thanks Mr.Amit for your clarification.

Whether the section 297 attracted in following case:

A director of a private limited company is carrying on proprietory concern. The services provided by the proprietory concern to the company, so in this case whether 297 gets attracted.

If a listed company accepts an order from a group company (public unlisted co.) for supply of certain goods which the listed company regularly deals in, will it attract the provisions of section 297 (prior approval of the CG/RD, when paid up capital exceeds Rs.1 Crores)?

Dear Ms. Anagha,

If u read section 297 it simply says except with the consent of the Board, a director of the company or his relative, a firm in which such director or his relative is a partener or any other partner in such a firm, shall not enter into any contract with the company for the sale, purchase or supply of any goods, materials or services.

So, in your case provisions of section 297 is applicable.

Regards

Dear Ms.Archana

Generally contract falling under section 297 requires the previous consent of the Board by passing a resolution at a Board Meeting. However a relaxation under sub-section (3) of section 297 has been provided, whereby the previous consent of the Board is not required if the circumstances are of urgent necessary and within 3 months, the consent of the Board is obtained by means of resolution passed at a Board Meeting.

However, the Department vide its letter No. 8/11/75-CL-V dated 25.03.1975 has opined that incase of a company having paid up capital of Rs. one crore or more, the relaxation given under section 297(3) shall not apply since the previous approval of the CG is required.

In your case bothe companies are public limited company  so section 297 is not applicable.

Regards

Hi

Section 297 does not apply to:

 1. Giving or taking loans.

2.Contract in respect of immovable property (as it is not 'good' ).{Letter No. 9/4190-CL-X dated 27.03.1990}.

3.Contract between two public Companies.

4.Contract of employment of director or managing or whole time director.[ Circuler No.8/11/75-CL-V dated 27.03.1975]

5.Contract for employment of relative of director.

6.Contract entered into by the company with the dealer on principle to principle basis. [Circuler No. FM 8/297/56-PR dated 02-08-1956]

7. Professional services of the nature given by firms of solicitors and advocates, etc.[circuler No. 8/11/75-CL-V dated 05.06.1975]

8.hiring of office premises on rent as the transaction is in immovable property. [Department Clarification dated 10-09-1990]

Regards

Mr. Kishore,

It depends on which type of service is provided by the director to the company.

For more info on  Section 297, follow my post:

https://www.caclubindia.com/forum/messages/2009/9/47987_section_297_loophole.asp

If you need further clarification than contact me

Ankur Shah (Practicing Company Secretary)

“Guru Gautam” Bungalow, Inside Parshwa Tower,

Nr. Shyamal Cross Road, 132ft. Ring Road,

Satellite, Ahmedabad – 15

Contact: + 91-9427633901

E-mail: ankurjewel @ gmail.com

Blog: csankur.blogspot.com

Applicability of section 297

1.Purchase of brand name registered in the name of Director, by A Ltd. and issue of share in lieu thereof.

2.Takeover of partnership firm in which Directors are partner/proprietorship concern of Director, having land, building, plant & machinery etc. by A Ltd. and issue of shares towards purchase consideration 

Thanks

Dear Anagha & Kishore,

As section 297 says " except with the consent of the Board, a director of the company or his relative, a firm in which such director or his relative is a partener or any other partner in such a firm, shall not enter into any contract with the company for the sale, purchase or supply of any goods, materials or services".A proprietory concern is none other than the proprietor  himself.So in your case also,director is deemed to be the person transacting with the comapny & thus,SECTION 297 IS ATTRACTED HERE.