Companies Act, 1956
Sec 300 - Interested director not to participate or vote
in Board's proceedings.
(1) No director of a company shall, as a
director, take any part in the discussion of, or vote on, any contract or
arrangement entered into, or to be entered into, by or on behalf of the
company, if he is in any way, whether directly or indirectly, concerned or
interested in the contract or arrangement; nor shall his presence count for the
purpose of forming a quorum at the time of any such discussion or vote; and if
he does not, his vote shall be void.
(2) Sub-section (1) shall not apply to
(a) a private company which is neither a
subsidiary nor a holding company of a public company;
(b) a private company which is a subsidiary of
a public company, in respect of any contract or arrangement entered into, or to
be entered into, by the private company with the holding company thereof;
(c) any contract of indemnity against any loss
which the directors, or any one or more of them, may suffer by reason of
becoming or being sureties or a surety for the company;
(d) any contract or arrangement entered into
or to be entered into with a public company, or a private company which is a
subsidiary of a public company, in which the interest of the director aforesaid
consists solely
(i) in his being a director of such company
and the holder of not more than shares of such number or value therein as is
requisite to qualify him for appointment as a director thereof, he having been
nominated as such director by the company referred to in sub-section (1), or
(ii) in his being a member holding not more
than two per cent of its paid-up share capital;
(e) a public company, or a private company
which is a subsidiary of a public company, in respect of which a notification
is issued under sub-section (3), to the extent specified in the notification.
(3) In the case of a public company or a
private company which is a subsidiary of a public company, if the Central
Government is of opinion that having regard to the desirability of establishing
or promoting any industry, business or trade, it would not be in the public
interest to apply all or any of the prohibitions contained in sub-section (1)
to the company, the Central Government may, by notification in the Official
Gazette, direct that that sub-section shall not apply to such company, or shall
apply thereto subject to such exceptions, modifications and conditions as may
be specified in the notification.
(4) Every director who knowingly contravenes
the provisions of this section shall be punishable with fine which may extend
to fifty thousand rupees.