Oppression and Mismanagement [Section 241 to Section 246] of the Companies Act

Section 241 to Section 246 covers provisions relating to ‘Oppression and Mismanagement’ under the Companies Act. The briefing of all the sections is contained hereunder-

Sections Briefing
Section 241 Application to Tribunal for Relief in Cases of Oppression, etc.
Section 242 Powers of the Tribunal
Section 243 The consequence of Termination/ Modification of certain agreements
Section 244 Right to apply to the Tribunal
Section 245 Class Action
Section 246 Application of some provisions to application made to the Tribunal under section 241 or section 245

Interestingly, the terms ‘Oppression’ and ‘mismanagement’ are not defined under the Companies Act. Hence, the general meaning of both the terms needs to be considered. The simple meaning of ‘Oppression’ is that it is an unjust or cruel exercise of authority/ power. Whereas, ‘Mismanagement’ means conducting affairs in some prejudicial, dishonest or inept manner.

Let us look into some of the important provisions attached with ‘Oppression’ and ‘Mismanagement’ in the present article.

Circumstances under which application can be filed to the Tribunal-

In case of ‘Oppression’ and ‘Mismanagement’, under any of the following circumstances, the member of the company can file an application to the Tribunal-

1. Affairs of the company are being conducted/ led in an oppressive manner; or

2. A material change is undertaken which is not in the interest of the member.

Notably, the right to apply to the Tribunal is available also to the Central Government, if the Central Government is of the opinion that the affairs of the company are conducted in a manner prejudicial to the public interest.

Powers to the Tribunal-

Oppression & Mismanagement Section 241-246 Companies Act, 2013

Provisions of Section 242 of the Companies Act defines powers available to the Tribunal on ‘Oppression’ and ‘Mismanagement’ application done by the member. Accordingly, if the Tribunal is of the opinion that the affairs of the company are being conducted in a manner prejudicial to the interest of the members, public or company then it has the power to pass the order as deemed fit. The order may provide for any of the following –

1. Regulation of conduct of the affairs of a company.

2. Purchase of either shares or interest of the members by other members. However, in case the shares are purchased by the company, there should be a consequent reduction in its share capital.

3. Restriction on the transfer/ allotment of the shares of the company.

4. Termination/ setting aside/ modification of any agreement between the company and the managing director/ any other director on specific terms and conditions.

5. Termination/ setting aside/ modification of any agreement between the company and any person. Notably, such termination/ setting aside/ modification is possible only after due notice and consent from the concerned party.

6.Setting aside any transfer/ delivery/ execution/ payment or any act related to the property which is made by or against the company within a period of three months before the date of application.

7. Removal of managing director/ manager/ any other director of the company and manner of re-appointment of the same.

8. Recovery and manner thereof of undue gains made by the managing director/ manager/ director.

9. Appointment of directors who are required to report to the Tribunal.

10. Levy of costs as Tribunal deemed fit.

Minimum number of members for filing an application to the Tribunal-

As per Section 244 of the Companies Act, the following number of members should be minimum there for filing an application to the Tribunal-

Type of company Minimum number of members
The company having a share capital • Lower of –

1. Not less than 100 members of the company; or

2. Not less than 1/10th of the total number of the members.

• Any member/ members holding not less than 1/10th of the issued share capital.

The company not having a share capital Not less than 1/5th of the total number of the members.

Important points-

  • Tribunal has the right to waive all/ any of the above requirements of the minimum number of members for filing an application to the Tribunal.
  • One or more members can make an application, on behalf of all, after obtaining consent in writing from the rest of the members.

Class action [Section 245]-

The important provisions are simplified in the below table-

Particulars Details
Circumstance for filing an application to the Tribunal The Specified number of member/ members/ depositor/ depositors/ any class of them are of the opinion that the management/ conduct of the affairs of the company are being conducted in a manner being prejudicial to the interest of the company/ members/ depositors.
The requisite number of members for filing an application The company having share capital-

• Lower of –

1. Not less than 100 members of the company; or

2. Not less than prescribed percentage of the total number of the members.

• Any member/ members holding not less than prescribed percentage of the issued share capital.

The company not having share capital-

• Not less than 1/5th of the total number of the members.

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