Sec 241 deal with application to tribunal for relief in case of oppression, ETC. The terms oppression and mismanagement are not defined under the Companies Act, 2013. These terms are to be interpreted by the court depending upon the facts of each case.
Mismanagement refers to practices of managing the company incompetently and dishonestly. Violation of Memorandum of Association, Articles of Association, or other statutory provisions would amount to mismanagement.
Elder v. Watson Limited,1952 SC
In the case of elder v. Watson Limited1952 SC, the term oppression was defined. Oppression refers to a misdemeanor committed by majority shareholders upon the minority shareholders of the company.
Dale And Carrington Investment. P. Ltd. … vs P.K. Prathapan and Others on 13 September 2004
It was held that increasing the capital of a company with the sole purpose of gaining control over can be termed as oppression.
If the Central Government believes that the company affairs are being conducted in a manner prejudicial to public interest it may apply to the Tribunal. An application under section 241 should be made to the principal bench of the Tribunal.
If the Central Government believes that:
Any Person Concerned in The Management of the Company Is——–
1. Guilty Of Fraud
3. Persistent Negligence
4. Default in Carrying His Obligations
5. Breach Of Trust Sound
Business Practices Have Not Been Used the Company Has Been Managed by a Person Who Is Likely to Cause Damage to the Interest of Trade and Business to Which the Company Pertains the Company Has Been Managed by a Person Who Intends To—–
1. Defraud the Creditors
3. Or Another Person for A Fraudulent
4. Or Unlawful Purpose Or
5. In A Manner Prejudicial to The Public Interest.
Rules for such orders are ——-
- Rule 81 Application under section 241
A request made under clause (b) of subsection (1) of section 241 of the Act must be made in writing and include the supporting documentation listed in Annexure. When an application is submitted under Section 241 on behalf of any members of a company eligible to apply under Subsection (1) of the said Section, by any one or more of them, the letter of consent signed by the remaining members of the company eligible to present the petition on their behalf shall be annexed to the application. The names and addresses of all the members on whose behalf the application is submitted shall also be included. The Company, other respondents, and any other individuals the Tribunal directs must receive copies of every application lodged by this rule.
- Rule 82 Withdrawal of Application which is under section 24
A request made under clause (a) or clause (b) of subparagraph (1) of section 247 of the Act may not be withdrawn without the Tribunal’s permission. The Form Number NCLT 9 must be used to apply for withdrawal under Subrule (1).
- Rule 88 Reference to the Tribunal
Any referral to the Tribunal made by the Registrar of Companies under Section 441 of the Act, any referral to the Tribunal made by the Central Government under the proviso to Subsections (5) of Sections 140, 221, Subsection (2) of Section 224, Subsection (5) of Section 224, Subsection (2) of Section 241 of the Act, any referral made under Subsection (2) of Section 75, any complaint made by any person under Subsection (1) of Section 222, or any reference made by a firm under clause (c) of sub-section (4) of section 22A of the Securities Contracts (Regulations) Act, 1956, must be made through a petition or application in Form No. NCLT. 9 in Annexure A and be supported by the papers listed in Annexure.
What is National Company Law NCLT?
It is a quasi-judicial body which is authorized for dealing with the corporate disputes which are civil and arising under the Companies Act.
- NCLT will handle all actions under the Companies Act, including
- and corporate wound-up.
- Not a single civil court will have jurisdiction over the before-mentioned matters.
- The cases which are pending before the (BIFR) Board for Industrial and Financial Reconstruction as well as those pending under the Sick Industrial Companies (Special Provisions) Act, 1985, might be heard by the NCLT.
- Also, matters pending before the Appellate Authority for Industrial and Financial Reconstruction will be taken up.
- It can also take on matters involving corporate oppression and mismanagement.
The members who have a right to apply under section 241 are:
When a company has a share capital the following members can apply under section 241:
- Not Less Than One Hundred Members or Not Less Than One-Tenth of The Total Number of Its Members, Whichever Is Less
- Any Member or Members Holding Not Less Than One-Tenth of The Issued Share Capital The applicant or applicants must have paid all call money and other sums due on them before applying.
- When a company does not have a share capital at least one-fifth of the total number of its members shall apply under section 241.
- In addition, the Tribunal may waive any of the requirements under section 244 to enable members to apply under section 241.
The recent collapse of large companies and corporations globally has made such entities to carefully ponder over their actions towards affairs of the company. Accountability has increased by the tool of class action suits that are filed against the management personnel regarding their deeds of oppression and mismanagement. The individual shareholder of the company and the minority shareholders have been empowered to take up action against the unjustified abuse of power and authority by the managerial personnel under the law regarding oppression and mismanagement. An individual may file an application before the tribunal informing about the oppression and mismanagement carried out by any key personnel, against him or any other shareholder of the company.
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