Purview of section 297 of companies act 1956
CS Usha Nimesh
(Querist) 01 September 2011
This query is : Resolved
In my case there are two companies,
Co. A a public co. having paid up capital of more than Rs. 1 crore
Co. b a pvt ltd co.
both A & b have common director and shareholders and Co.A wants to enter into an agreement with Co.b for giving its manufacturing work on outsource basis.
Now do Co. A need to get Central Govt prior approval under section 297 of the companies act 1956 before signing such agreement.
Sailesh Kumar Shah
(Expert) 01 September 2011
said agreement is not fall in the ambit of section 297 of the Companies Act,1956.
CS Usha Nimesh
(Querist) 01 September 2011
thanks for replying but u/s 297(1) includes an agreement of sale, purchase or supply of any goods, materials or services
and i have also read in Ramaiya that contract of supply of services may also include contract of supply of one's own services,wont it also include supply of goods to co. b for getting work done on job work basis??
Sailesh Kumar Shah
(Expert) 01 September 2011
B is not private company since both companies director and shareholders are common.(See Section 4 of the companies act, 1956)and Agreement between two public company is not purview of section 197 of the Companies Act, 1956.
A V Vishal
(Expert) 01 September 2011
Ms Usha
Prior approval of Central government is required under S 297, file form 24A with the MCA to seek permission to go ahead with the contract.
Advocate. Arunagiri
(Expert) 01 September 2011
Both the companies are having interested directors. so,MCA approval is necessary.
If the both the companies are already in the business, which is referred in the agreement, they can get the approval.
Sailesh Kumar Shah
(Expert) 01 September 2011
I would like to draw your kind attention that Section 297 is applicable only 'Private Company' not 'Public Company'. So, there is no need of such permission.
CS Usha Nimesh
(Querist) 02 September 2011
cordial thanks to all d experts for rendering their valuable opinion on my quarry..and on Mr. Shailesh though u r right in using sec 4 that a pvt ltd which is a subsidiary of a pub. ltd co is also a pub but still even if there is a agree bet hol & sub they need prior approval of CG u/s 297.
Sailesh Kumar Shah
(Expert) 02 September 2011
Ms. Usha
This section does not apply to a contract between two public limited companies, because the word used is ‘private company’. If the word used is ‘company’, then it may be interpreted as any type of company (public / private). Thus, the two parties of the contract must be 1st party - any type of company, and 2nd party - director / relatives / firm / private company.
