Central Govt involvement under section 297

Requirement for prior approval of the Central Government

In the case of a company having a paid-up share capital of Rupees One Crore or more, all contracts of the nature referred below other than the exempted contracts can be entered into only after they are approved by the Central Government as per the proviso under section 297(1):—

(a) sale, purchase or supply of any goods or materials or services;

(b) underwriting the subscripttion of any shares in or debentures of the company.

Form of application

The application shall be made electronically in e-Form 24A prescribed by the Notification No. GSR 58(E) dated 10^th Feb., 2006 alongwith the fee prescribed in Companies (Fees on Applications) Rules, 1999.

Delegation of power to Regional Director

The power under the said proviso is delegated to the Regional Directors at Mumbai, Kolkata, Kanpur and Chennai for providing approval by the Offices of Regional Directors located in their Regions.

Secretarial checklist

Check whether exempting provisions contained in section 297(2) of the Companies Act, 1956 were not applicable? If not, check that:—

1. Consent of the Board of directors was obtained by a resolution passed at a meeting for entering into contracts in which directors were interested.

2. Prior approval of the Central Government (Regional Director) has been obtained, if the paid up share capital of the company is not less than Rs. One Crore.

3. The particulars of the contract were entered in the Register of contracts, in accordance with the provisions of section 301.

4. The requisite resolutions were recorded in the minutes of Board meetings.

Enclosures required to be submitted with the application

E-Form 24A has to be submitted with following enclosures:

(1) Copy of agreement containing particulars of contract.

(2) Copy of board resolution and proceedings of meeting.

(3) Detailed application should be filed as an optional attachment containing details relating to the following;

(a) Whether the terms of the contract conform to the prevailing market rates.

(b) Whether the company has entered into any contract with any other person in respect of sale, purchase or supply of the same kind of goods, materials or services and whether the terms of such contract are similar to the terms of the proposed contract(s). Reasons for variation in rates, if any should be indicated

(4) Certified copy of the latest amended Memorandum and Articles of Association;

(5) Certified copy of the audited Balance Sheet and Profit & Loss Account for a last three years;

(6) Certified copy of the Minutes of the General Meeting at which the proposal was approved, if in case of the non availability of the quorum of disinterested director in a public company.