08 July 2011
Dear Sir, if the paid up capital of the company is rs 1 crore or more and the company falls within the exceptions given under section 297. is it necessary to obtain central government permission for transaction with a related party? Rgds
08 July 2011
I think u have misread the section and the section states if paid up capital more than Rs. 1 crore permission of central government required.
Provided that in the case of the company having a paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government.
Also there is an exception that 2) Nothing contained in clause (a) of sub-section (1) shall affect -
(a) the purchase of goods and materials from the company, or the sale of goods, and materials to the company, by any director, relative, firm, partner or private company as aforesaid for cash at prevailing market prices; or
(b) any contract or contracts between the company on one side and any such director, relative, firm, partner of private company on the other for sale, purchase or supply of any goods, materials and services in which either the company or the director, relative, firm, partner or private company, as the case may be, regularly trades or does business :
Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost of which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts; or
(c) in the case of a banking or insurance company any transaction in the ordinary course of business of such company with any director, relative, firm, partner or private company as aforesaid.
CAclubindia
