21 June 2010
there r 2 compnies, A pvt. ltd. & B pvt. ltd., Mr. X is a common director. B pvt. ltd. operates COLD STORAGE. A contracts with B for cold storage. whether section 297 of companies act will be applicable or not.
i think there is a specific case law on COLD STORAGE. pl provide me the name & matter of that case law
23 June 2010
Hi, S.297 applies to pvt companies too. In this case S.297 is applicable. Since the case satisfies the conditions of S.297, ie, common connection of Mr. X (Directly - direct contract for supply or purchase, or indirectly – holding directorship / member of contracted co. either him or through his partner / relative). You have to comply with consent of Board of “A Pvt Ltd” for purchase as well “B Pvt Ltd” for sale if the case is as such. Also, if Paidup Share Capital of any Co. is >1Crore, then you have to apply to CG Approval, if not approved contract is void. There are certain exceptions like: transaction should be at prevailing mkt rates, the transaction is of Value <5000Rs. P.a on regular trades or the Co. is banking / insurance Co. The advantage given under this S.297 is in case of urgent necessity the consent of Board is accorded within 3mnths of transaction also, if consent not accorded it is “voidable” at option of board that means it can be ratified but within 3mnths of duration. other experts view is solicitated if required...
CAclubindia
