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Section 297 applicability

Sunil V B (CFO) (31 Points)

11 July 2012

Private limited company (share capital more than 3 crores) and unlisted Public limited company enter into contract covered under section 297. Please clarify is central goverenment approval needed?

Early Responses Appreciated.

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8 Replies

Aarush (Delhi) (1566 Points)
Replied 11 July 2012

Yes,

board’s sanction to be supported by the PREVIOUS approval of the Central Government, if the company’s paid-up capital is not less than Rs.1 Crore.

Sunil V B (CFO) (31 Points)
Replied 11 July 2012

Who has to take the approval pvt ltd company or the public limited(unlisted) company.

Aarush (Delhi) (1566 Points)
Replied 11 July 2012

This section applies to: All companies, public and private.

AND

This section does not apply to:

1. Contracts between two public companies

2. Transaction in immovable properties [Letter No. 9/4190-CL-X, dated 27th March, 1990],

3. Contract of employment of a director or managing or whole-time director

4. Contract entered into by the company with a dealer on a principal to principal basis

5. Professional services of the nature given by firms of solicitors and advocates, etc.

6. Indirect interest of a director as provided in section 299. unlike Section 299 this Section does not deal with indirect interest of a director, even though it may be substantial or real.

7. a government company in respect of contracts entered into by it with another Government company

8. A company and a body corporate or a co-operative society in which a director or relative is a member or diretor.

Applicability of the Section is to be determined at the time of entering into the contract. If no permission under this section is required at the time of entering into the contract, subsequent permission is not necessary even though there may be a change of circumstances which would require permission to be taken for a fresh contract.