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santhosh (student)     11 February 2010

Section 297

 Hi There

Need a clarification in this case :



1. A Ltd and B Private Ltd have two common directors with more than 2% shareholding in both companies. B( P) Ltd is in travel agency business. A Ltd purchases air tickets for its common director through B(p) Ltd and makes payment by cheque. Is it a contract covered by section 297 of the Companies Act 1956?



2. A Ltd and B Private Ltd have one common director with more than 2% shareholding in both companies. B( P) Ltd is a share broking company. A Ltd buys & sells shares of different companies through B (p) Ltd and makes payment by cheque. B (p) Ltd charges usual brokerage. Is it a contract covered by section 297 of the Companies Act 1956?



Thank You ...





 6 Replies

Suresh CSLLM (Service)     12 February 2010

In both the case consideration paid is assuming at market value, section 297 is not applciable.

1 Like

Asha Pole (Legal)     18 February 2010

But the above consideration should be paid in cash and at prevailing market prices, this is what is mentioned in companies act under sec 297 2 (a)

CA Adarsh Agrawal (CMD of SHAYVIDZ Group)     18 April 2010

Sec 297 (2) (a) : Exception

If Goods or Material are sold or purchased for CASH CONSIDERATION + at MARKET PRICE, then sec297 will not be applicable.

  

In Case 1 : Sec 297 will not be applicable if the cheque is paid to A Pvt Ltd AT THE TIME OF PURCHASING TICKETS.  But if the tickets hav been purchased on CREDIT BASIS, then Sec 297 will be applicable.

  

In Case 2 : Broking Services by B Private Limited is not covered in the exception of sec 297(2)(a). But there is another exception u/s 297(2)(b) - If either party regularly trade + transactions(here Brokerage) upto Rs.5000/-P.A. , then Section 297 will not be applicable.

Dr. L.N. Lion (CMD)     22 April 2010

Mr. Learner, you have not only the procedural knowledge but you have very much practical knowledge on company matters.

1 Like

CA Adarsh Agrawal (CMD of SHAYVIDZ Group)     23 April 2010

Thanks alot sir !!

I am just trying to improve myself !

thats it.

Prerna Jain (CS)     15 November 2012

Dear Professionals,

I have query in Sub section 2(a) of sec 297 that does NEFT payments are also covered in the perview of Cash like Cheque?

Thanx in advance

 

Regards,

CS Prerna Jain


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