Section 297

Hi...

1. Private Company having a paid up capital of Rs. 1 Crores or above and proposing to enter into a contract with a Public Company (having a paid up capital of less than Rs. 1 Crores) should obtain (though not mandatory as per the provisions of section 297) the previous consent of the Board of Directors. Such Private Company need not obtain the approval of the Central Government. The reason being the Board should have the knowledge of the Contracts in which the Company is entering, and which Directors of the Company are interested therein.

2. The other party which is a Public Company (having a paid up capital of less than Rs. 1 Crores) and proposing to enter into a contract with a private company in which any of its Director is a Director or member, needs to ontain the previous consent of the Board of Directors and no need to obtain the approval of the Central Government as the paid up capital of the Company is less than Rs. 1 Crores.

3. If your Company which is a Private Company having a paid up capital of Rs. 2 Crores proposes to enter into a contract with a Private Company (having a paid up capital of less than Rs. 1 Crores) in which any Director of the Company is a Director or member needs to obtain:

 a) Previous consent of the Board of Directors which has to be accorded only at a duly convened Board Meeting and cant be accorded by way of a Circular Resolution,

b) Previous approval of the Central Government in E-form 24A since the paid up capital exceeds Rs. 1 Crores.

4. The other private Company also needs the consent of the Board of Directors but no approval of the Central Government has to be obtained as the paid up capital does not exceed the prescribed limits.

Hope am able to solve ur query....

God Bless

Udit Sharma

Section 297 is applicable to transaction between of companies. In the cited case CG approval is required.

Plz find attached file for more clarification.

Hi

In first case CG approval is required but in second case CG approval is not required.

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]

Dear Jaideep

The provisions of section 297 of the Companies Act, 1956 have to be complied with only in case of a Contract between two parties wherein one of the parties is a Private/Public Limited Company and the other party is any one of the following:

1. any Director of the Company,

2. any relative of any Director of the Company,

3. any firm in which any Director of the Company or his relative is a partner,

4. any partner of the firm in which any Director of the Company or his relative is a Partner,

5. any private Company in which any Director of the Company is a Director, or

6. any Private Company in which any Director of the Company is a member.

Since the case in question deals with a Contract between the Private Company on one hand and a Public Company on the other hand, the Private Company  need not mandatorily comply with the provisions of section 297 as the same are not applicable  in the said case. However, will be applicable for the other party which is a Public Limited Company and is proposing to enter into a transaction with a Private Company in which any of its Directors is interested.   

God Bless

Udit Sharma       

Well said Udit.

Agree with the expert.

Agree with Udit.

Well done.

Originally posted by : udit sharma
	Since the case in question deals with a Contract between the Private Company on one hand and a Public Company on the other hand, the Private Company  need not mandatorily comply with the provisions of section 297 as the same are not applicable  in the said case.

Dear Udit,

As per my understanding, private company needs to comply with the provisions of the Companies Act, 1956.

Also find attach extracts of article for sec 297.

Plz correct me if I am wrong.

Dear Jaideep

Agreed that the provisions of section 297 are applicable to both Private Companies as well as Public Companies.

But the point i am trying to make here is that if your Company is a Private Company and it proposes to enter into a contract for sale,purchase or supply of goods, materials or services with a Public Company in which a Director of your Company is a Director or member, then the Private Company need not comply with the provisions of section 297 but the the said provisions shall have to be complied with by the other party,which is a Public Limited Company.

Regards 

Agree with Expert Udit.

As per Section 297 contract entered between private company and public company for sale purchase or supply of services, and paid up capital is Rs. 1 crore or more and fall within the provision of 297  , then private company need not to take CG approval, but Public Company is required to take CG approval.

If both are private company having paid up capital of Rs. 1 crore or more, then both Company is required to take CG approval.

further both are public company having paid up capital of Rs. 1 crore or more, then no company is required to take CG approval.

Thanks

Rajeev Nayak   

Thank u all