Section 297

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CA CS Amit Borade

Chief Accountant

2828 Points Joined December 2007

Dear All

BOARD’S CONSENT AND CENTRAL GOVERNMENT’S APPROVAL FOR CERTAIN CONTRACTS IN WHICH PARTICULAR DIRECTORS ARE INTERESTED [Sec. 297]

Any contract falling within the purview of any of the three exemptions as mentioned in clauses (a), (b) and (c) of sub-section (2) of Section shall neither require the consent of the Board of Directors of the Company nor the previous approval of the Central Government. Such contracts are as under:

(i) The contract for the purchase of the goods and materials from the company; or the sale of goods and materials to the Company by any of the parties as mentioned earlier, for cash at prevailing market price.

Here Cash means what??

If payment is made or received after 6 months in cheque then also exemption is eligible or not?

Replies (6)

Ajay Mishra

Company Secretary

74352 Points Joined March 2009

PAYMENT OF CHEQUE EQUIVALENT TO CASH

Department’s clarification- A cheque may be treated as the equivalent of a cash payment for the purpose of section 297.

However, the term “cash” must be interpreted in a reasonable manner. It would include not only payment in legal tender but also other mode of payment which are recognized by law or customary practice as amounting to payment in cash. For example, payment by cheque or through a bill or hundi which is payable on demand would be tantamount to payment in cash.

Views of other experts solicited,

Best Regard

CA CS Amit Borade

Chief Accountant

2828 Points Joined December 2007

Thanks Ajay

But what if payment made after 6-7 months, because in that perid it stands as creditor or Debtor to co. (if credit period is there)

Ajay Mishra

Company Secretary

74352 Points Joined March 2009

Dear Mr. Amit

Department and Companies Act, 1956 is silent on that issue.

Malav Shah

Company Secretary and AVP Legal

171 Points Joined June 2009

Dear Mr. Amit

Payment can be made by cheque but has to be paid immdiately. There should be no credt period. The amount has to be paid on delivery and also the rate should at prevailing market price.

Regards

Malav Shah