Section 297 Query - Urgent


We have two Companies ( Private Limited) having 3 directors each.. now out of these three.....two directors are common in both.....Now one of the Company is proposed to provide services to other which has a paid up capital of more than 1 crore. The value shall be at market rate only....DO we need to take CG approval.. if yes then how do i show the quorum in board meetin as two directors out of three will be interested in both the companies...

officer CS

hi shruti


i think CG approval will not be required bkoz its mentioned that exemption when  :-

Transactions shall be done for Cash at Prevailing Market Prices

so i think not required..

but please confirm




CS mayuri Lal



Company Secretary

Agreed with Mayuri........

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]

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officer CS

n also bkopz coz services are not covered u/s 297

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297 very well covers services-

297 1(a) for the sale, purchase or supply of any goods, materials or services...

Plus the contract wont be a for cash.


Dear Friend,

You have to take approval of Central Govt. and the practical way to pass the resolution is that you may appoint two directors and pass the resolution and after passing resolution you may file there resignation.

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Though the directors are interested, but it being a Private company they will not  be excluded for the purpose of counting quorum, since sec.300 doesnot applies to pvt. cos.

Had it been a public co., the directors will be excluded for counting quorum and also they cant vote u/s 300. But in that case, i think even a single director can appoint additional director u/s260 if AOA mentions(as per regulation 75 of Table A.)

But in ur case directors will counted for quorum and thereby resolution can be passed and also CG approval will be required.

Pl. guide me if i am wrong somewhere.

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CG approval is required as S-297 exempts contracts for sale or purchase of goods at prevailing market prices and not providing services.

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CG approval is not required.


Originally posted by : Vikram Yadav

CG approval is not required.

 can u please state the reasons for the same.



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