Contract is entered into with a private company

The contract can be entered into with a firm in which are the Managing Director along with his wife and two sons a partner
only if the foll6wing conditions are fulfilled:
1. The consent of the Board of Directors is obtained.
2. The previous approval of Central Government is also taken, (Since
. the paid-up capital of company is more than Rs. 1 crore).
(ii) Duties of R in the given case are:
(a) He should disclose his interest at a meeting of the Board.
(b) He can give a general notice to the Board and take reasonable steps
to ensure that it is read at the first meeting of the Board.
(c) He should not participate in the discussion or vote in the proposed
contract, nor should his presence be counted for the purpose of r.’::\ forming a quorum at the time of any such discussion or voting.
‘0iJI In case where the contract is entered into with a private company in which
wife of Mr. R (MD) and his sons Sand T are members, the situation is different, Section 297 (1) is attracted only in circumstances where Director himself is a member/director of a private company. Consequently the restriction for entering into contract by interested director will not apply in the present case as R, the Managing Director, is neither a director nor a
member of the private company. .
(b) applicable for both direct and indirect loans given to directors. As
per Section 295 loans to directors require approval of Central Government. A loan essentially means that it is an advance of money or of some articles upon the understanding. that it shall be returned and mayor may not carry interest. The Bombay High Court in the case of Dr Fredie Ardeshir Mehta vs. Union of India [(1991) 70 Compo cas. 210] seeking quashing of a prosecution launched under Section 295, came to the conclusion that selling of one of the flats to one of its directors on receiving half price in cash and agreeing to accept the balance in instalments is a credit sale by the company and cannot be described even as an indirect loan. Hence the transaction in question will not attract Sectio 295.
P. 30.9l.. The Articles of Association of a company states that a director shall not vote in respect of a contract in which he is interested. In a resolutipn put up for approval of the shareholders, can a director exercise is voting right in favour of a contract in which
he is interested. a director exercises his voting right’a a shareholder, he is free to vote in his own best interests like any other shareholder.......
A provision in the articles of association of a company stating that a director shall not vote in respect of a contract in which he is interested does not preclude him from voting thereon as a shareholder in the general meeting of the company. A shareholder may vote as he pleases even when his interests are different from or opposed to those of the company. Shareholders are not tmstees for the company or for one another.
However, in Cooks vs. Deeks, it was held that if directors use their position as directors to obtain for themselves the property of the company, as for example, by means of a beneficial contract, they cannot, by using their voting power as shareholders in general meeting, prevent the company from claiming the benefit of it.
Further Section 182 makes it clear that a public company or a private company which is subsidiary of a public company shall not put any restriction on voting right of members on any ground except those specified in Section 181 (i.e. restriction on exercise of voting right of members who have not paid calls or on shares in regard to which the company has exercised any right of lien).