Query on section 297 and 314 of companies act, 1956

Dear All,

Facts:

X Limited – Listed Company

Y and Co. – Partnership Firm

Z and Co. – Partnership Firm

Mr. A – who is Managing Director of a XYZ LIMITED

Mr. B – Partner in Y and Co. along with Mr. A

Mr. B – Partner in Z and Co. but Neither Mr. A is Partner nor any relative as per Schedule 1(A) of Mr. A is partner

 

Now as per section 297 X Limited cannot enter into contract with Y and Co but Company can enter into Contract with Z and Co.

 

I want to appoint Mr. B under Section 314 in the Place of Profit.

 

My Query is that after appointing Mr. B in the place of profit (as a consultant or employee) will the Contracts entered into with Z and Co. will attract Section 297.

 

Kindly Revert as soon as possible

 

Thanks in advance

Dinesh

Replies (3)

I am extremely Sorry..

Correction in above Post.

Mr. A is Managing Director in X limited i have by mistake mentioned XYZ Limited.

 

Thanks

Dear Dinesh,

As per my observations since Mr. B is only a partner in Z & Co. the contract is not being entered directly with the partner( Mr. B of Mr. A in Y & Co.) saves him from falling within the purview of Section 297.Moreover his being appointed as a consultant or agent does not in anyway attract section 297 in relation to the Contract being entered into with Z & Co. Do wait for other views.

Thanks & Regards

Amit Mishra 

BSamrish & Co.

New Delhi

Dear Dinesh,

If Mr. B is proposed to be appointed as an employee/consultant in X Ltd.  such appointment will be covered u/s 314 as he is partner in Y& Co. wherein the other partner is Mr. A who is MD of X Ltd.

By virtue of appointment of B to office/place of profit (being partner of Y & Co.), shall not affect the independent contract of X Ltd. and Z & Co. (where B is partner) and hence such contract will not fall under the purview of Section 297.

 

Regards,

CS Amit Bhatia

 

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