Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Sec 297 contract

Dipanjan (N/A) (89 Points)

29 June 2010

If a pvt co (having capital of more than Rs. one cr) sales goods to a firm in which one of its director is interested Section 297 is applicable.

If due to oversight no approval was taken form previously and it is now decided to apply for the same what remedial measure can be taken for the transactions entered into from April 2010 to June 2010. Whether this Sec 297 approval can be applied retrospectively. Can there be transactions after applying for the approval but before the approval is actually granted.

Reply
Follow
Share

6 Replies

Deepak Maharishi (CS) (514 Points)
Replied 29 June 2010

I think such company now should go under CLSS ...by default any form file late shall be covered under such scheme.

Accordingly, approval shall be granted and immunity from prosecution shall also be given.

Views of other members are also solicited.

Thanks and regards

Deepak Maharishi

Upgrade to CAclubindia Pro. Subscribe Now!

Deepak Maharishi (CS) (514 Points)
Replied 29 June 2010

Some more clarifications:

This section specifically states "previous approval".. that means there is no scope of retrospective approval.

This may also be well understood from the language itself which contains the word like "shall not enter into any contract" and "no such contract shall be entered into except with the previous approval of Central Government"

Thanks and regards

Deepak Maharishi

vivek (CS) (751 Points)
Replied 29 June 2010

As there is requirement of Prior approval of CG, as far as my point is concerned u will have to go for Compounding of ofence u/s 621A. But before going for compounding be careful no further compounding in next three years and if required go for composite petition.

Regards,

Deepak Maharishi (CS) (514 Points)
Replied 29 June 2010

Dear Vivek,

You would remember, currently there is are two schemes running by the MCA 1. CLSS 2. EES

So I dont think till 31 Aug, 2010 any one needs to go under compounding under 621 A.

Moreover, even if someone get compounding done, still there is always authority with the RoC to initiate legal prosecution for a default in compliance.

Thats why I mentioned that in this case better would be CLSS which would grant immunity from the prosecution also.

Thanks and regards

Deepak Maharishi

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 29 June 2010

Check a few things more -

1. Capital means Paid up capital.... if paid up capital is less than 1 crore then Prior CG approval not reqd.

2. Prior approval not reqd if paid up capital is increased after entering into contact.

3. sec.297 is not attracted if the person becomes specified person after entering into contact.

If the above points are not able to save u, then u can do one thing.. show the contract wid 3rd party who is not a specified person & justify on papers that the director has acted as agent of that 3rd party till these period of 6months.. (u may face problem in adjusting financial books).. but its not gud practice so the same is not advisable... be careful for future transactions....

Upgrade to CAclubindia Pro. Subscribe Now!

vivek (CS) (751 Points)
Replied 29 June 2010

Dear Sir,

I completely agreee with you but a small doubt is as below, plz clarify:-

(viii) Scheme not to apply to certain documents - (a) This Scheme shall not apply to the filing of documents for incorporation or establishment of place of business in India or where specific order for condonation of delay or prior approval under the provisions of the Companies Act, 1956 is to be obtained from the Company Law Board or the Central Government or Court or any other Competent Authority is required;

is this only related to incorporation or all approval related forms?

Regards,