section 297

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 December 2010 Dear Members,

One limited company executed sell/purchase agreement for
commodities/goods for Rs. 100 cr. in which they are dealing with the partneship firm in which all the Directors are interested as they or relatives are partners. The agreement executed by taking approval of Board and the same was approved by the Members in its Meeting.

The authorised share capital Rs. 75 lacs and paid up share capital Rs65 lacs when the agreement was executed.

The paid up capital susequently increased to Rs. 1.50 crores,but the agreement was subsisting and transaction was within the perview of the Agreement for the unexusted amount for and upto the total sum for Rs.100 cr.

Kindly advise whether agreement is as per the provision section 297??
Whether approval of Central Government is required to obtain after the paid up share capital increased above Rs.1 cr. ?? as agreement executed before this increased in paid up share capital.

Please advise

Jayashree S Iyer

Jayashree S Iyer (Expert)
Follow

14 December 2010 As per A. Ramaiya's Guide to the Companies Act :

Applicacability of the section is to be determined at the time of entering into the contract. If no permission under this section is required at the time of entering into the contract, subsequent permission is not necessary even though there may be a change of circumstances which would require permission to be taken for a fresh contract.

This it appears that where contracts entered into by companies when their paid up capital was less than Rs. 1 crore and raised upwards subsequently, approval of the CG would not be necessary until the expiry of the contract.

udit sharma

udit sharma (Expert)
Follow

14 December 2010 Hi...

Agreed with the expert the paid up capital of the Company at the time of entering into contract has to be considered and since this was less than Rs 1 crores, no approval of the CG is required.

God Bless

Udit Sharma

Upgrade to CAclubindia Pro. Subscribe Now!