The Companies Act, 1956
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 vote, 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 1[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 2[fifty thousand rupees].
1. Subs. by Act 65 of 1960, sec. 107, for certain words (w.e.f. 28-12-1960).
2. Substituted by Act 53 of 2000, sec. 145, for “five thousand rupees” (w.e.f. 13-12-2000).