Section 299 applicability

Tridha Thakur (Finance Executive & Company Secretary) (57 Points)
Replied 18 January 2012

Originally posted by : Tridha Thakur
	Pls confirm that if X, Y are directors in both Indian Public Ltd Company & Foreign Company and a contract is executed between these 2 companies. X & Yare not members in both the companies ..just directors only. In my opinion Section 299 is applicable i.e Specific Disclosure is to be taken from both the directors and enter the contract/arrangement in Section 301 register - both the sections are applicable If we missed to enter in register by not taking Specific Disclosure (just taken general Disclosure - Form 24AA) from Directors in the Board Meeting where contract has been approved by the Indian Public Ltd Co- Will it be a Compliance under the act? But some others CS's are saying that to need not enter in Section 301 register as we are taking Form 24AA from each director every year (general Disclosure) i.e Section 299 & 301 are not applicable as per them as directors are not having pecuniary interest in both the companies. Pls suggest me the expert opinions on the above issue? Thanking you., Tridha

Rakesh Dhanuka (Company Secretary) (478 Points)
Replied 18 January 2012

No need for any specific disclosure if general disclosure is given by the directors in form 24AA under section 299 which is valid for one financial year. All the contracts with the company in which directors are interested is to be recorded in Register of Contracts u/s 301.

Tridha Thakur (Finance Executive & Company Secretary) (57 Points)
Replied 18 January 2012

Dear Rakesh!

you mean to say that sec 299 (specific disclosure from Director in Board Meeting) is not applicable and sec 301 applies.

Rakesh Dhanuka (Company Secretary) (478 Points)
Replied 18 January 2012

Yes, specific disclosure is not required (as required under section 297) if the name of these company is mentioned in general disclosure.

Others view solicited.

Tridha Thakur (Finance Executive & Company Secretary) (57 Points)
Replied 18 January 2012

Dear Rakesh!

What i understood from your reply is to "Enter contracts in the register as per sec 301".

As per you, Sec 299 doesn't apply & section 301 applies.

But Section 301 says entries to be made pursuant to section 297 & 299.

Section 297 doesn't applies to above case as the contract is between a Public Ltd Co and with a Body Corporate (Foreign Company).

My query is Applicability of Section 299 only.

Section 299 says (1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose, the nature of his concern or interest at a meeting of the Board of directors.

The words in any way interested, should be construed as extending not only to the case where the director has a personal interest but also to the case where he owes a duty which may conflict with his duty. As per this - Sec 299 (1) applies - Specific Disclosure needs to be taken which automatically attracts Section 301.

(6) "Nothing in this section shall apply to any contract or arrangement entered into or to be entered into between two companies where any of the directors of the one company or two or more of them together holds or hold not more than two per cent of the paid-up share capital in the other company".

Can we take exemption from Sec 299 on the basis of shareholding (directors hold NIL % of shareholding in both co's) as already General Disclosure taken from Directors at the beginning of the year? If we take exemption u/s 299 -automatically Sec 301 doesn't apply.

Rakesh Dhanuka (Company Secretary) (478 Points)
Replied 19 January 2012

Dear, I have said that specific disclosure is not required if general disclosure(notice) u/s 299 is given by the director. I have nowhere used the word that section 299 is not applicable in your case. The contract is to be recorded in Register of Contracts u/s 301. 299(6) do says that provision of the section is not applicable if holding of director(s) does not exceed 2% of the paid-up capital but sub-section (1) says that " concern or interested in any way, whether directly or indirectly". So I will suggest enter the details of contract in Register of Contract as a good corporate practice.