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/...
It is true that the Board of directors in a Company is supposed to act in the best interest of the Company as they are answerable to the Share-holders and submits a report in the Annual General Body Meeting (AGM). In every Company, normally, the majority in the Board consists of the representatives of the majority shareholders though it is a best corporate practice to give proportionate representation to the minority and also to have some independent and expert directors on the Board.
If a petition under section 397/398 of the Companies Act, 1956 is based on a Share Purchase Agreements and its validity, then, despite the pendency of a civil dispute or arbitration proceeding simultaneously, the proceeding under section 397/398 becomes so complicated and dealing with issue is really challenging. I would like to present a case study with typical facts. The analysis and my opinion on the issue follow the presentation of facts.
We can find so many judgments of Constitutional Courts on section 397/398 of the Companies Act, 1956 and the courts have ruled and maintained some principles as to how the provisions of section 397/398 of the Companies Act, 1956 are to be interpreted. I feel that despite the settled legal principles, the facts of each case to be carefully gone into in a petition under section 397/398 of the Companies Act, 1956 and many directions or orders are passed based on facts.
I was of the opinion that the technological advancements and the schemes like MCA providing for on-line corporate filing, will be of help to the corporates. I was also of the opinion that the MCA scheme will also boost the pace in which the companies are being incorporated in India. There is a positive side of MCA scheme providing for speedy and risk-less corporate filing, however, I want to now focus on the negative issues of MCA scheme and as to how the scheme is being misused.
I have been writing articles continuously on section 397/398 of the Companies Act, 1956 touching complicated and interesting areas as I feel. I am of the strong opinion that for good corporate growth, the law governing corporates or the companies should be clear and there should be an “effective redressel mechanism”.
It is a fact that it is very rare to see a petition by a group of minority or majority under section 397/398 of the Companies Act, 1956 in listed Public Companies. As everybody knows a Company needs to get qualified as per SEBI (DIP) regulations and should satisfy other requirements before getting its shares listed over a stock exchange.
Law governing the rights of the minority, the propriety of the majority and the protection given to the shareholders under section 397/398 of the Act, is always very interesting and also complicated. There are many interesting and complicated issues under section 397/398 of the Companies Act, 1956.
As we all aware, section 397/398 of the Companies Act, 1956 deals with oppression and mismanagement and the protection to the minority against the majority. The law makers could not have expected that a situation will come where a majority are harassed or oppressed by the minority. Sections 397/398 and other connected provisions of companies act, 1956 meant to provide relief to the minority shareholders against the majority when minority are oppressed or the property of the company is mismanaged.
The issue of impleading legal representatives of a deceased party to a proceeding under section 397/398 of Companies Act, 1956 stands on a different footing to that of a normal Civil Suit. In a normal Civil Suit before a Civil Court, it is the rule that the legal representatives of a deceased person to be impleaded in the proceeding.
I need not reiterate the fact that Company Law is complicated everywhere in view of its exposure, the interest of the stake holders, plethora of regulations, the stakes and the responsibility of the state or the statutory authorities. As everybody knows, in India, the jurisdiction to decide company disputes substantially rests with the Company Court and the Company Law Board.
