Company seeking to make contract void please advise

639 votes

As per the Limitation Act, a suit to cancel or rescind a contract must be filed within 3 years from when the Plaintiff came to know about the fact due to which he wishes to cancel or rescind the contract.

Which in the present case would be the knowledge of the fact that the director was personally interested in the contract and he could not have entered into the contract without the prior sanction/permission of the Board of Directors.

Therefore the company was within the limitation period if the suit was filed within 3 years of getting to know of the above fact.
(For eg. If the Company realised on 1.1.2015 that the contract could not be entered into then the Company could file the suit until 31.12.2018 (3 years from the knowledge))

Advocate Tanvi Parikh LawRato

736 votes

The interest of director in the service contract is contrary to the provision of law as per company law 2013. The suit is not time bared since it is under the limitation law. For information give PM to me.

Advocate Bharat Pandirao Pawar LawRato

943 votes

Dear Querist
According to the provisions of Section 184 (3) of the Companies Act, 2013 "A contract or arrangement entered into by the company without disclosure under sub section (2) or without participation by a Director who is concerned or interested in any way, directly or indirectly, in the contract or arrangement, shall be voidable at the option of the company.
In the present case details of service contract will be required to analyse the situation of limitation. however you may refer to part - II of Schedule of Limitation Act, 1963 which specifically deals with "Suits relating to Contracts".
Generally period of limitation is 3 years however Section 5 of the Limitation Act 1963 explains the "Extension of prescribed period in certain cases" wherein you have to make an application in court justifying the delay that has occurred for filing of instant suit. Please feel free to ask for any clarifications.
regards
Adv. Vinit J. Mehta

Advocate Vinit Jignesh Mehta LawRato