Section 297 of the Companies Act, 1956

Section 297 of the Companies Act, 1956
This Section deals with a contract entered into by a Director. Consent of Board of Directors is required for certain contract in which a Director is interested. This Section is applicable for the following contracts only.
i.	Sale, purchase or supply of any goods, materials or services, or
ii.	For underwriting the subscription of any shares in, or debentures of the Company.
Consent of Board of Directors is essential, under this Section, for the contract  between a Company and
			i.		a Director of the Company; or
			ii.		a relative of the Director; or
			iii.		a firm in which such Director or relative is a partner; or
			iv.		any other partner in such firm; or
			v.		a Private Company of which the Director is a member
			vi.		a Private Company of which the Director is a Director.
If the paid up capital of the Company is more than one crore, besides consent of the Board, prior approval of Central Government is required.
There are some exceptions. That is the above said restrictions are not applicable in the following cases.
				i.		Purchase or sale of goods or materials for cash at prevailing market prices.
				ii.		The contracting parties are engaged in regular business and the amount of transaction does not exceed Rs. 5000/- a year
				iii.		Transactions made by banking or insurance Company in their ordinary course of business.
In case of urgent necessity, such contract can be entered without the consent of the Board, provided, consent shall be obtained within three months of the contract.
Here the consent mentioned is not a general consent, but specific.
Important points:
i.		This Section does not apply to contracts between two public Companies.
ii.		A transaction of loan made by a Director to the Company is not come under the purview of Section 297 since it is not a contract for sale or purchase or foe rendering services.
iii.		Lease of immovable property is outside the scope of this Section as the reference to “goods” means movable property.
		Department clarification vide letter no 9/4/90-CL X dated 27-03-1990.
iv.		Since Indian Contract Act approves oral contract, provisions of this Section applicable to oral contracts also.
v.		Professional services of solicitors/advocates are excluded from the scope of this Section.
		Department Circular no-8/11/75-CL-V, dated 5-6-1975.
vi.		Appointment of an additional Director of a person who is a relative of a Director is not a violation of the provisions of this Section since it does not constitute a contract between the Company and sitting Director.
vii.		Appointment of Managing Director or Whole-time Director will not attract the provisions of this Section
		Department Circular no-8/11/75-CL-V, dated 5-6-1975
vii. viii		For obtaining Central Government’s approval, form prescribed is  Form 24A Hiring of office premises on rent( Department clarification dated 10-09-1990-CS October)