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Applicaibility of section 297

sunil prakash jain (Sr.manager) (101 Points)

28 November 2011

Facts:-

1) Company A & B, both private limited Company

2) One Director is common

3) Holding Co.of A& B is same.

4) Company A is planning to sale it fixed assets like Vehicle / Computer to Company B at market price and in cash.

Query

Wheter section 297 atttracts

Thanks

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6 Replies

CA GOVIND KRISHNA AGARWAL (CA) (202 Points)
Replied 28 November 2011

Section 297 applies to all companies, public as well as private. However, it does not apply to the contracts where both the parties to the contract are public companies. The section would apply where one of the two companies (being parties to the contract) is a private company and the other is a public company, but in such a case, it will have to be complied with by the public company only.

Therefore in this case section 297 apply

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sunil prakash jain (Sr.manager) (101 Points)
Replied 28 November 2011

Thanks, but will it make any difference if there is no written contract is executed between Co.A&B

Smriti Dhawan (Company Secretary ) (347 Points)
Replied 28 November 2011

Mr. Sunil

Transaction between two private companies attracts Section 297 of companies act but under section 297(2)(a) if any transaction is For Cash at prevailing market prices Section 297 would not be applicable, and hence, there is no requirement for obtaining approval of the Board and/or Central Government, under the provisions of Section 297. However, these transactions would come within the purview of Section 299 and hence, thereby would require an entry in the 301 Register.

(please clarify whther the holding company is private or public company?)