Company Law : There can be disputes between majority group and minority shareholders in any Company and these disputes come very frequently in c...
Company Law : In any litigation, the Court or the authority adjudicating the matter can pass interim orders and the matter will get finally disp...
Corporate Law : Section 397/398 of the Companies Act, 1956 provides a relief to the minority against the majority if the majority indulges in the ...
Company Law : The study of various judgments of High Court and Supreme Court under section 397/398 of Companies Act, 1956 speak volumes about th...
Company Law : I have been continuously focusing at the complications in the corporate world and especially about the protection to the sharehold...
Income Tax : The contention urged by the Applicant that the Scheme of Demerger must necessarily comply with Section 2(19AA) which is meant for ...
Company Law : Decision of a company has to rest on views of majority; in case of disagreement by the minority, remedy lies u/s 397 & 398 and not...
Company Law : The petitioners claiming to hold 4132 partly paid ordinary shares of Rs.100/-each and 3065 fully paid preference shares of Rs.100/...
The contention urged by the Applicant that the Scheme of Demerger must necessarily comply with Section 2(19AA) which is meant for availing tax concession cannot be read as a mandatory requirement for all schemes of amalgamation / arrangement/de-merger under Sections 391/392/394 of 1956 Act . The said provision cannot be read and interpreted to include assets/units/undertakings/business belonging to the respondent-IRSL which were never transferred or intended to be transferred to IRTL and which are not mentioned in the Scheme of Arrangement.
There can be disputes between majority group and minority shareholders in any Company and these disputes come very frequently in closely held companies or Private Limited Companies. The Companies Act, 1956 provides certain rights to the shareholders
In any litigation, the Court or the authority adjudicating the matter can pass interim orders and the matter will get finally disposed of. Once the matter is dispose of finally, there ends the litigation and the final order can be executed. If there is a provision for review having limited scope, the court can review its order. This is the procedure in any case; be it a suit for recovery of money, be it a petition seeking divorce, be it a petition for compensation under Motor Vehicle Law and be it a Writ Petition.
Section 397/398 of the Companies Act, 1956 provides a relief to the minority against the majority if the majority indulges in the oppressive acts and the acts of mismanagement. It is not that every shareholder can avail the remedy available under section 397/398 of Companies Act, 1956 and section 399 specifically deals with the issue as qualification to file a petition under section 397/398 of the Act. Section 399 of the Companies Act, 1956 substantially provides as follows:
The study of various judgments of High Court and Supreme Court under section 397/398 of Companies Act, 1956 speak volumes about the complications in dealing with the cases of ‘oppression and mismanagement’ under section 397/398 of Companies Act, 1956. There were many judgments under section 397/398 explaining the powers of Company Law Board, meaning of ‘oppression’, powers under section 402, the powers of Company Law Board in passing orders under section 402 in order to regulate affairs of the company in future, the responsibility of the board to hear all the necessary parties to the proceeding, the issue of public interest, the issue of dead-lock, the issue of applying the principles of partnership in closely held private companies, the scope of section 399, the issue of granting ‘consent’ by members, the issues of maintainability and the procedure to be followed by the Company Law Board etc.
I have been continuously focusing at the complications in the corporate world and especially about the protection to the shareholders in a Company. I have seen cases where the majority does everything in order to deny the rightful share of the minority shareholders or the group; or to make the company a shell company.
Decision of a company has to rest on views of majority; in case of disagreement by the minority, remedy lies u/s 397 & 398 and not in Civil Court. When a case falls within four corners of section 397 and/or section 398, ordinary civil court’s jurisdiction would stand barred to deal with such a dispute
It is known to the corporate professionals that there are so many complications in getting the disputes resolved among shareholders in the Company. The disputes among the shareholders or the groups tend to come in closely held companies as the largely held Public Limited Companies should follow SEBI (DIP) regulations while allotting shares and as SEBI and the Stock Exchange monitors various issues in respect of Listed Public Companies.
The procedure prescribed in Company Law Board regulations is not too technical like the provisions of Civil Procedure Code, and the procedure is based on the logic and reason. I did personally feel that even the Company Law Board normally do not rely on technicalities and I personally feel that substance is to be looked into over technicalities by the Company Law Board in a petition under section 397/398 of the Companies Act, 1956.
The provisions of Companies Act, 1956 makes it very clear that every company should maintain proper books of accounts and should record all the transactions of the Company pertaining to sales, purchases, expenses, receipts, liabilities and Assets. Not only recording the transactions, every Company is also supposed to maintain the documentary proof in support of the transactions as per law.
