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Neha Agarwal (student)     12 March 2012

Sec 297 of companies act

Dear All,

Please clarify on the following:

If any Private Co. (having >1crore paid up cap) enters into a lease/hire purchase agreement with a Private Co. (having >1crore paid up cap) whereby the one of the Director is common in both. Will only Board Resolution is enough or its compulsory to file form 24A and who shuld file?


Thanks in Advance.



 3 Replies

Bhagwan Tolani (Salaried)     12 March 2012

  If the paid-up capital of the company is Rs. One Crore or more, an application shall be made to the Regional Director in Form No. 24A of Companies General Rules and Forms for its prior approval.

 The Section requires such an application to be made to the Central Government but the Central Government has delegated to the Regional Directors at Bombay, Calcutta, Madras and Kanpur the powers and functions under the Section vide Notification No. GSR 563 (E), dated 19-8-1993.

For More details please refer to  A Detailed analysis-Section 297 of the Indian companies act, 1956.

Murali (Advocate and Corporate Consultant)     12 March 2012

Basically there is difference between Lease and Hire purchase. It would have been apt if the nature of the transaction is exactly spelt out. Anyhow, section 297 deals with the purchase, supply or sale of goods or material or services. If the issue is lease of property by one company to another company where there is a common director too, the provisions of section 297 shall not apply to such lease transaction as the property leased is immovable property but not goods.  If the transaction is sale, in the sense, if the hire purchase transaction is sale/purchase, it should obviously be hit by the provisions of section 297 of the Act and the requirement of prior central Government approval for such transaction/contract in view of the circumstances explained in the given case. The said section provides two exceptions form the rigor of the section to the transactions for sale , supply and purchase of goods or services  between the entities in which the directors are interested, and they are, i) the transactions of sale, supply or purchase of goods and materials  are  at prevailing market prices for cash consideration and not on credit basis or , ii) the contacting parties  regularly trade or carry on the business Provided that such contract or contracts do not relate to goods and materials the value of which, or services the cost of which, exceeds five thousand rupees in the aggregate in any year comprised in the period of the contract or contracts and if either of these conditions  is complied with, no prior permission of the central government is required. If I am wrong, I may please be corrected.

Murali Krishna W

Advocate and Corporate Consultant.


Neha Agarwal (student)     13 March 2012

Mr. Murali,

Can u provide more highlight on Hirepurchase agreement of immovale property!!!

will the same is covered under sec 297??

Is the leasing of immovable property will be considered as a Service?

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