Applicability of section 297

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CA YOGESH (Querist)
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09 May 2009 ABC pvt. ltd having paid up capital more than 1 crore enters into contract with director relative for purchase of goods and not obtained the permission of central government.Further, company sold the goods to third party.

Now my question is whether this contract is void ? If so, then wht will happens as you know goods are already sold.

Ankur Garg

Ankur Garg (Expert)
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09 May 2009 Contract is not void perse (itself).

As per section-297(5) contract is voidable at the option of the board.

As far as CG approval is concerned yes there has been a violation.

As per my opinion compounding of offence would be an option u/s 621A available to you.

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