Section 297

As per Section 297, Except with the previous approval of the Central Government, a private company of which the director is a member or director, shall not enter into any contract with the Company

a. For the sale, purchase or supply of any goods, materials or services; or

b. after the commencement of this Act, for underwriting the subscripttion of any shares in, or debentures of, the company.

As per my opinion both companies requires to comply section 297, wait for expert opinion from members..

Both the Private companies need to comply with Sec 297. i.e Board's consent & Central Govt's previous approval by both companies. 

Section 297 is applicable to contracts of sale/purchase of goods and supply of services between

i) private and private limited companies,

ii) public and private limited companies

and is not applicable to contracts between

i) private and public company

ii) public company and public company

In a contract of sale, one will be buyer and oner will be seller. As both purchase and sale are covered by the section and as both the companies are private, provisions of section 297 will be applicable to both and both companies will require approval. 

Regards,

Nidhi