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The concept of Oppression and mismanagement helps corporate democracy find its roots. The term ‘oppression’ is not clearly defined by the Companies Act,2013. In the rule of Foss v Harbottle, The principle of majority originates which provide that the minority shareholders have no cause of action in law for any wrongdoing by the company and the action brought about in respect of such losses shall be brought either by the company itself or through a derivative action.
While majority rule, often
overshadows minority rights. The objective is to maintain a balance between the
interest of the small shareholders and the effective control of the company. To
safeguard minority rights, the Indian Companies Act, 2013 has put in place
sections 241 to 246 of the Companies, Act 2013.
Table of Contents
Mismanagement are not defined in the Companies Act. The meaning of these words,
the purpose of Company law should be used in a broad sense and not in any
strictly literal sense. However, Mismanagement refers to gross negligence.
Mere misconduct of business cannot be considered as Mismanagement. Oppression
must be a continuous process and refers to an act of the majority, which is
harsh and burdensome on the minority.
Any member of the company having a complains
that the affairs of the company are being conducted in a manner which is
oppressive in nature or any material change has taken place which is not in the
virtue of its members then he has a right to apply to the tribunal, Such an
application can also be made by the Central Government to the tribunal.
Further, If the tribunal
is of the view that the company’s affairs are being conducted in a manner
prejudicial to the interest of the public, members or company then the tribunal
shall make such orders as he may deem fit on whether the company should be
wound up or not.
What are the Rights of the
Shareholders Against the Oppression and Mismanagement?
Facts of the Foss V.
Oppression-Oppression refers to exercising power in a burdensome, unjust
and inequitable manner.
The below-mentioned acts
amount to Oppression and are summarized as under-
Mismanagement-Mismanagement refers to the situation where the affairs of the
company have been conducted in such a way detrimental to the interests of the
file the Application to the Tribunal for Relief in Case of Oppression and
to the tribunal-In case of Oppression and Mismanagement, the first
remedy available to a minority is to apply to the Tribunal when the members of
the company apply that the affairs of a company are being conducted in a manner
detrimental to the public interest or such a manner oppressive to any member or
Who is Eligible to Apply?
When the members of a company complain that the affairs of the company are being conducted in a manner oppressive to any member or members may apply to the Court for an order, provided such members have a right to apply. The provisions come into existence when the aggrieved member can exhibits that he suffered an inequity in his capacity as a shareholder and not in any other capacity.
Other than members
following other people can also apply for an application to the tribunal-
Who Cannot File the Application-
The Signing of the
The requisite number of
members must sign the application. The requirement differs from the fact as to
whether the company has a share capital or not.
Conclusion-The Act was taken into consideration to strike a balance
between the Right of Minority and the protection of the interest of Minority
shareholders by preventing the Oppression and Mismanagement. Solitary Acts of
Oppression or mismanagement will not give rise to an action.
Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.
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