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Section 297

Anchal talwar (Company Secretary) (113 Points)

01 November 2011

Dear All

Does Hire of Machinery on rental basis attracts Sec 297.Please help.Kindly confirm .Provide relevant case study or material.

this is the main object of the company which is providing the machinery on rental basis.

Thanks

Anchal

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5 Replies

APOORV SAXENA (Chartered Accountant) (794 Points)
Replied 01 November 2011

I think it will not be covered.

The section says " Sale, Purchase, Supply of goods, Material or Services"

so, hire purchase wont cover here !!

Sawita Rani (ca final) (229 Points)
Replied 03 November 2011

As per me, it will attract. It is a service.

prathiba (company secretary) (259 Points)
Replied 04 November 2011

Hi Anchal,

As hiring of machinery on rental basis is a service, it would attract Sec.297 and hence, prior board approva is required and also Central Govt approval, if the paid up capital of the company is Rs.1Crore or above. In this regards, a circular has been issued by the Ministry of Corporate Affairs.

General Circular No. 52/2011

F.No. 17/170/2011 CL.V

Government of India

Ministry of Corporate Affairs

CL V Section

5th Floor, A Wing, Shastri Bhavan,

Dr. R.P. Road, New Delhi

Dated 25th July, 2011

All Regional Directors,

All Registrar of Companies,

All Stakeholders.

Sub : Simplified procedure for obtaining online approval of Central Government under

section 297 of the Companies Act, 1956.

Sir,

The Ministry of Corporate Affairs has been receiving representations form various

stakeholders to simplify the approval processes under section 297 of the Companies Act, 1956.

In order to cut timelines in giving approval, the Ministry has decided to simplify the

procedures and to give approval online, if the proposed contract has been approved by the

shareholders by way of special resolutions in a general meeting.

2. According to new procedure, application will be made in a new e-form with the

prescribed fee. The relevant information like terms of contract and details of Board resolutions

and special resolutions shall be captured in the e-form. The e-form shall also be certified by the

practicing professional who shall specifically certify the correctness of the information and

declarations given by the company in the e-form.

3. The company while seeking approval of the directors and shareholders in their meetings shall

specifically take approval to the effect that: --

(i) Proposed contract is competitive, at an arm’s length, without conflict of interest and is

not less advantageous to it as compared to similar contracts with other parties.

(ii) The company has not made any default in repayment of any of its debts (including

public deposits) or debentures or interest payable thereon and has filed its upto date

Balance Sheets and Annual Returns with the Registrar of Companies;

(iii) The proposed contract is falling within the provisions of section 297 of the Act and

provisions of sections 198, 269, 309, 314 and 295 are not applicable in the proposed

contract.

(iv) The company and its Directors have complied with the provisions of sections 173,

287, 299, 300, 301 and other applicable provisions of the Companies Act, 1956 with

regard to the proposed contract.

4. The application will be processed online and approval of Central Government shall also

be made available to the applicant company online on the basis of declarations made by the

company and certifications by the professionals given in the e-form.

5. If any of the information or declaration given by the company or certificate given by the

professional in the e-form is found to be wrong, then the applicant company, its Directors and

professional shall be liable for penal action under section 297 and 628 of the Companies Act,

1956 in addition to penal action prescribed in regulations of the respective professional institutes.

6. The process of online approval of Central Government under section 297 of the

Companies Act, 1956 is likely to be implemented with effect from 24th September, 2011.

Yours faithfully,

-sd-

(Kamna Sharma)

Copy to: Assistant Director

1. All concerned

2. PS to CAM and PS to MOS

3. PPS to Secretary, Additional Secretary, Joint Secretaries

Anchal talwar (Company Secretary) (113 Points)
Replied 07 November 2011

Thank you everybody....

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 07 November 2011

Thanks to Pratibha for her kind reply.

Transactions of immovable properties are outside the ambit of section 297. Question is machinery is immovable or movable property.

Regards,

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