The provisions relating to oppression and mismanagement are in chapter xvi of the companies bill, 2012. Oppression as per section 3971 of ca 1956 has been defined as when affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members while the term mismanagement has been defined under section 398 1 as conducting the affairs of the company in a manner prejudicial to. Chapter xvi of the companies act, 20 deals with the provisions relating to prevention of oppression and mismanagement of a company. The provisions relating to oppression and mismanagement are in chapter xvi of the. Cyrus mistry late last year as the chairman of tata group and the subsequent oppression and mismanagement petition filed by the mistry group against the tatas before nclt has brought into foray, the intense debate and interpretative approach towards provisions dealing with oppression and mismanagement under the statute, i.
The bombay high court concluded that considering the wide and special powers bestowed upon the clb the predecessor of the nclt under section 402 of the ca 1956 now under section. In due course, a dispute arose out of the jva, and mr. Subject, i shall confined myself to the right of members in case of oppression and mismanagement. On the other hand, ca 20 provides for provisions relating to oppression and mismanagement under sections 241246. Earlier, there used to be much emphasis on technical issues under section 397398 of the companies act, 1956 rather the object of the provision now a. Hopefully the new law that empowers the auditor general to. Oppression and mismanagement under the companies act, 20. Meaning of oppression and management, who can apply, who cannot apply, foss and harbottle case.
Class action is one of the youngest additions to indian jurisprudence particularly, in indian corporate jurisprudence. The section which covers oppression and mismanagement is 241 of companies act 20. Oppression and mismanagement under companies act, 20. Thus, oppression is a concept which remains open to interpretation as a strict. Before filling any petition at the nclt, one should take care that the application is within the time period as prescribed under the limitation act 1963 and the first cause of action has been arose within a period of three years from the date of filling petition at the nclt. In the companies act, 20 chapter xvi deals with the topic of prevention of oppression and mismanagement. Application to tribunal can be filed if its likely that affair of the. Rejects arbitration route for disputes in petitioner cos affairs, upholds sec 397398 course delhi h dismisses writ petition challenging l order, whereby petitioners application us 8 of. No relief under either of the section can be granted if the act complained of is a solitary action of the majority.
On the contrary the acts claimed to oppressive are continuous in nature. Oppression is the exercising of authority or power in a burdensome, merciless, or unjust manner. Oppression and mismanagement under the companies act. As the aforesaid disputed question is dependent on facts and merit of a case, it. The practical lawyer power of the company law board in.
The focus of this article is to analyse the provisions in the companies act, 20 pertaining to oppression and management in light of the ongoing feud. The question of arbitrability of oppression and mismanagement disputes was considered by the bombay high court in the case of rakesh malhotra v. Applicability of limitation act in oppression and mismanagement. Oppression and mismanagement of a company mean that the affairs of the company are being conducted in a manner that is oppressive and biased towards the minority shareholders or any member or members of the company. With this back ground and looking to vastness of th. The section which covers oppression and mismanagement is 241 of companies act 20 and chapter xvi which corresponds to a clubbed section of 397 and 398 of the erstwhile companies act, 1956. Because, the law evaders find a way to the loophole.
Oppression and mismanagement drafting of petitions, stages. Mistry firms seek a waiver from nclt on 10% shareholding threshold for filing the case alleging oppression and mismanagement. Preparation tips for my pendrive and test series students. Prevention of oppression and mismanagement lawteacher. Penalty charts under companies act, 20 by pawan nagasuri. Bakshi as the managing director and appointing justice g. The nature of disputes under oppression and mismanagement are not onetime action or conduct that may merely arise out of an agreement but rather a series of actions. Amendment pdf is available in the download section of our site. Prevention of oppression and mismanagement shopify. Who can file an application against oppression and mismanagement.
Notes on new sections of prevention of oppression and mismanagement. Thus all contentions raised by the appellant were repelled resulting in dismissal of the application. Sections covered under prevention of oppression and management of companies act, 20. What does prevention of oppression and mismanagement mean. Section 3971 of the companies act provides that any member of a company who complains that the affair of the company are being conducted in a manner. Give your answer according to the provisions of the companies act, 20. This document is highly rated by b com students and has been viewed 2696 times. Revision notes on sarfesi act, 2002 by kaival shah. Introduction to begin with, let us understand the basic concept hidden behind this chapter.
Failure to distribute the amount of compensation received on nationalisation of business of company among members, where required to be so distributed. Prevention of oppression and mismanagement of a company. Top 10 rulings delivered by high courts during 201416 on. Oppression and mismanagement fair dealing liquidation.
Clause b deals with mis management likely to occur on account of change in management. Minority rights on oppression and mismanagement under. Law on oppression or mismanagement us 397, 398 companies. The latest bombay high court judgement in abdul wahid abdul gaffor khatri vs. Thus, section 2411a also includes past acts of oppression. Whereas the term mismanagement means a situation in which something such as a company or an economy is organized or controlled badly. Oppression and mismanagement drafting of petitions. Chapter xvi of the companies act, 20 act sets forth rights and remedies in relation to prevention of oppression and mismanagement. Addition of respondents to application under section 397 or 398 powers of government to prevent oppression or mismanagement. Bakshi approached the nclt alleging acts of oppression and mismanagement against him by mipl.
The acts of mismanagement were done 8 years ago and mr. Maintainability of petition seeking relief in cases of. Prevention of oppression and mismanagement under the. In fact, it is a case of oppression and mismanagement qua company a, if the right of the company a is compromised. Combined provisions for relief related to oppression and mismanagement. So the exception has been provided separately for prevention of oppression and mismanagement for protecting the rights of minority shareholders. Earlier, there used to be much emphasis on technical issues under section 397398 of the companies act, 1956 rather the object of the provision now a days its objective. The terms mismanagement and oppression are nowhere defined in the companies act ca and it is the discretion of the court to decide whether the facts of the case amounts to mismanagement and oppression. The remedy for oppression lies in section 402 of the act, and section 399 of the act provides for who can apply for oppression or mismanagement. Why would the company law even introduce such a thing, when all the provisions are super clear and explanatory. Companies act provides for statutory reliefs in cases of oppression and. Practical and procedural aspects of drafting, art of pleading and court craft. The shareholders holding 15% of the voting rights of abc private limited filed an application to nclt alleging various acts of fraud and mismanagement done by mr. With a view to check abuse of majority power, the companies act contains special provisions for prevention of oppression and mismanagement.
There are difference of interests and opinions among individuals which results in forming of. A company is an association of individuals working with a common aim to achieve the purpose of the formation of the company and to earn maximum profit. Section 244 is a section determining who can become a complainant to raise cause of action under section 241, section 241 is a section giving rise cause of action to the complainant qualified us. Three acts amounting to oppression and mismanagement were brought to light in this case, each of which related to i the acquisition of docomo by tata teleservices limited ttcl, ii fraudulent fund diversion towards air asia india private limited air asia, and iii violation of article 118 of the articles of. Class action aims to prevent oppression and mismanagement in companies. The nclt decision dated july 2017 granted clarity on such allegations by confirming oppression, reinstating mr. The oppression must be continued in nature it is settled position that a single act of oppression or mismanagement is sufficient to invoke section 397 or 398 of the companies act. The term mismanagement refers to the process or practice of managing ineptly, incompetently, or dishonestly. Oppression and mismanagement free download as pdf file. Financial mismanagement by municipalities perpetuates o. Companies bill 2012 became the companies act, 20 act 18 of 20. Arbitrability of oppression and mismanagement in india. As india is a democratic country, the companies being a legal citizen also bestows in itself the power of democracy.