Section 245 brought in force from June 1, 2016 vide Ministry of Corporate Affairs notification number S.O. 1934(E) dated 01st June 2016.
Class Action Suit became reality for Indian investor(s)/depositor(s) under new Companies Act, 2013 which is also known as Representative Suit. This kind of lawsuit is very popular in countries like USA, UK, Singapore, Canada, Austria and other European countries.
Class Action Suit gained momentum with the case of Satyam, where the financials of the Company were manipulated for number of years and the Indian investors drown their hard earn money in the market due to fraud my company’s promoter. The noteworthy point was that the American depositors of Satyam were able to receive $125 million in settlement because of strong framework of class action in USA.
Class Action Suit is still on black white, but any member(s)/depositor(s) or any class of them fulfilling the requisite number as per Section 245(3) of the Companies Act, 2013 can file a Class Action Suit against:
Class Action Suit can be filed against any type of companies and the Companies Act, 2013 empowers the Central Government to exempt any company or class of company from this provision. However, banking companies are exempted from these provisions.
Further, the Class Action Suit is not permitted for matters which can be pursue for claiming the rights or damages by member(s)/depositor(s) under other sections of the Companies Act, 2013 and in case the Tribunal found that the member(s)/depositor(s) misuses the mechanism of Class Action Suit, they will be penalised as per Section 245(8).
In case the Company fails to comply with an order passed by the Tribunal, the Company shall be punishable with fine which shall not be less than Rs. 5 Lakhs but which may extend to Rs. 25 Lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 3 years and with fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 1,00,000/-.
Though everything on paper appears to be good, but in real scenario Class Action Suit is yet to break the ice and everything will depend on how the Tribunal will decide the initial cases which will ultimately shape the Class Action Suits in India.
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