Contracts in which directors are interested ‑ Whether proviso to the sub‑section, requiring approval of Central Government in the case of companies having paid‑up capital of Rs. 1 crore or more, applies to contract of employment of director as managing director - Companies Law - No. 8/11/75‑CL-V,

Letter : No. 8/11/75 ‑ CL-V, dated 29 ‑ 3 ‑ 1975. Subject:- Contracts in which directors are interested ‑ Whether proviso to the sub ‑ section, requiring approval of Central Government in the case of companies having paid ‑ up capital of Rs. 1 crore or more, applies to contract of employment of director as managing director The presumption that proviso to sub‑section (1) of section 297 introduced by the Companies (Amendment) Act, 1974 is relevant only in respect of those cases for which approval of the Board is necessary, is not correct. As far as companies having a paid-up share capital of not less than Rs. 1 crore are concerned, no contract shall be entered into except with the previous approval of the Central Government. The only exception to this requirement is the one provided for in sub‑section (2) of this section. The relaxation provided for in sub‑section (3) of this section does not apply in the case of companies having a paid‑up share capital of not less than Rs. 1 crore as they will be covered by the proviso to sub‑section (1) and the category of cases envisaged by sub‑section (3) are not supposed to arise in their case.