Regarding Section 297 of The Companies Act,1956

Dear Mr. Ketan

 IT is very much applicable to private companies

Hi All,

I totally agree with mr. Ajay.. Yes Section 297 is applicable to Private Company.

Applicability of the Section 297:

This section applies to:

1.      All companies, public and private.[2]

2.     Contract for sale, purchase or supply of any goods, materials or services in which a director or any person connected with a director in any of the ways mentioned in sub-section (1) of section 297 is interested,

3.      Contract for underwriting subscripttion of any shares in or debentures of the company,

4.      Oral contract, if it can be proved by circumstantial evidence. Under the Indian Contract act, a contract need not be in writing, and an oral contract is also valid in law. The provisions of Section 297 will accordingly also apply in respect of an oral contract.

 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 [Circular No. 8/11/75-CL-V, dated 5th June, 1975],

4.      Contract entered into by the company with a dealer on a principal to principal basis [Circular No. FM 8/297/56-PR, dated 2nd August, 1956],

5.      Professional services of the nature given by firms of solicitors and advocates, etc. [Circular No. 8/11/75-CL-V, dated 5th June, 1975],

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.[3]

7.      a government company in respect of contracts entered into by it with another Government company [Notification GSR No. 233, dated 31st January, 1978].

8.      A company and a body corporate or a co-operative society in which a director or relative is a member or diretor. [4]

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.

 

 

If private comoany dealing with proprietory concern of one of director with all director's concent than whether section 297 applicable to such company?

please immediately reply

thanks you in advance.

Yes it is applicable to such private company.

HI friends

can any one tell me whether section 297 is applicable on the contracts between 2 private companies 

i.e both the parties is private company. 

Yes, S. 297 is applicable to both the private companies.

Thanks Mr. Kulkarni,

But i heard somewhere that it is not applicable in Transactions between 2 private companies.

i know nothing is mentioned in the section, but i think i read a case law on it. & it is not specifically mentioned in the act.

can u send me the case law .

waiting for your positive reply.

Hi

 

Mr. Kulkarni is right, the provision of section 297 will apply to private and public limited company. If both contracting company is private company then section 297 will apply. However, if botj are public company then this section will not apply.

 

 

 

Regards

Sec 297 claerly says, "a private company of which the director is member or director, shall not enter into any contract with the company except with the consent of the board of Directors." Therefore the meaning is very clear that both the private companies will require the approval under sec.297. I hope this clears the doubt. It is not applicable where both the parties are public limited companies. (And it is "Mrs. Kulkarni" not "Mr.")

Hi

 

Sorry for using Mr. in place of Mrs in my reply.

 

Regards