ESSENTIALS PREREQUISITES FOR FILING A CASE OF OPERATION & MISMANAGEMENT UNDER THE COMPANIES ACT 2013

DEFINING
OPPRESSION- The unfair exercise of authority or power against the permission of the other person is known as oppression. The term ‘oppression’ is defined as ‘the act or instance of wrongfully exerting power,’ according to the Black Law Dictionary. It can also be defined as an act or occurrence of oppression, as well as the sensation of being heavily burdened, emotionally or physically, by difficulties, unpleasant circumstances, or anxiety.
It was found in the case of Dale and Carrington Investment Pvt Ltd. v P. K. Prathapan that increasing a company’s capital only for the goal of gaining control over can be considered oppression.
PREVENTION
Section 397 of the Companies Act of 1956 deals with complaints of tyranny and mismanagement. Section 241 of the Companies Act of 2013 establishes the right to file a complaint against tyranny. The Company Act’s Chapter XVI explicitly defines who can file a complaint of oppression and mismanagement, as well as when and how they can do so. A member may also file a complaint against a major change in the firm’s management or control that appears to be detrimental to the company. If the central government considers that a company’s dealings are detrimental in nature, it can submit an oppression and mismanagement application with the tribunal on its own.
WHO CAN APPLY
Section 244 of the Companies Act is also important because it specifies who has the authority to file such an application. The company has the right to file on behalf of the other members, and one member has the right to file on behalf of the other members. The right may be further differentiated in a company based on whether the company has a share capital or does not have a share capital. The share capital of the complaining member can be computed using either the number or the value of the share capital. When it comes to the number of members, it should be 100, or one-tenth of the whole membership, and when it comes to the value, it should be the members who own one-tenth of the total share capital value. 1/5th of the total members may apply in companies without a share capital. Returning to the right of one member to file on behalf of the other members, there is only one stipulation: the individual doing so must obtain the written approval of the others.
POWERS
• Sec 242 of companies act,2013
i) The first power conferred by the statute is the ability to issue an order. If it is determined that the company’s affairs have been or are being conducted in a detrimental manner, such an order may be issued. It has been said that the company’s winding up would not be ordered rashly, but that oppression and mismanagement will be addressed.
ii) The tribunal also has authority over three issues: 1) shareholders, 2) the company, and 3) others, according to the same provision.
iii) A tribunal may order the purchase of shares of members by other members or the corporation in the case of shareholders.
iv) Because oppression and mismanagement are rooted in the coagulation of shares in the hands of individuals or a few members, a tribunal may mandate a reduction in share capital or even impose restrictions on share transfer.
v) A tribunal may terminate or alter agreements signed between the company and management, or agreements made between the business and any other person, in the case of the company’s management, which is a critical part of the firm.
vi) In the instance of a company’s management, the tribunal has the power to dismiss the Managing Director, Manager, and Director, as well as recoup unjust gains and appoint a new MD, manager, and director.
APPEAL AGAINST ORDER
The NCLT’s (National Company Law Tribunal) decision can be appealed to the NCLAT (National Company Law Appeals Tribunal) (National Company Law Appellate Tribunal). Section 421 is the mechanism and clause that grants this right of appeal, and it is outlined below.
Any person who is dissatisfied with the tribunal’s ruling may file an appeal.
When the tribunal makes a ruling based on the parties’ agreement, there is no right of appeal.
Appeals must be filed within 45 days of the tribunal’s contested order, and extensions may be granted only when sufficient grounds for the late submission is presented to the court by such party, and such extension shall only be for another 45 days.
The appellate tribunal must allow the parties a reasonable opportunity to respond before issuing an order confirming, amending, or setting aside the order appealed against.
SEC 241 AND 421
It was only essential for members who were already constructively before the court to continue the procedures for the purposes of the petition under Sections 241 and 421. The Companies Act contains substantive provisions about an application that must be filed when a complaint of oppression and mismanagement is filed. It states who can file a complaint and when they can do so.
Under the aforementioned regulations, the central government may even take suo moto action in this regard. If a person is offended by a decision made by the tribunal, he or she may file an appeal under Section 421 of the Company Act.
The maximum deadline for appealing a company tribunal order has been set at 45 days, but the appeal can be prolonged for up to another 45 days if the court is convinced that there was a valid reason for the delay.
SEC 245 OF COMPANIES ACT
Section 245 of the Company Act defines the term “class action.” A class action lawsuit allows a group of people who have a common grievance against a firm to file a lawsuit against it. Claimants can pool their resources, such as attorney services, to reduce their lawsuit costs significantly. Individuals with little financial resources see the class action suit’s financial magnitude as a saving grace. The Investor Education Protection Support is frequently used to fund class action lawsuits. The viability of reimbursement from the IEPF, which is commonly considered an acid test under the Company Act of 2013, is subject to this funding. The application is typically made when the company’s business practises are detrimental to the company’s, members’, and depositors’ interests. A class action lawsuit could be filed against the company’s directors or auditors for providing deceptive reports to the members.
Who may bring class suit:

  • In the case of companies with a share capital, a class action suit may be brought by not less than 100 members of the company, or not less than 10% of the total number of members, whichever is less, or any member individually or jointly holding 10% of the share may bring a class action suit, provided that all such shareholder members have paid up all the share dues.
  • If the company does not have a share capital, a class action can be filed by at least 1/5th of the members.
  • A class action suit may be brought by not less than 100 depositors of the firm or a minimum of 10% of the total depositors, whichever is less, or by any depositor individually or depositors jointly holding 10% of the outstanding deposit of the company.

CONCLUSION
The weapon of class action litigation, which are filed against management employees for their acts of oppression and mismanagement, has improved accountability. Under the law regarding oppression and mismanagement, individual shareholders and minority owners have been given the authority to take action against the wrongful misuse of power and authority by managerial employee.

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