One or more than one person can bring the legal suit. But sometimes there might be a situation where the suit is against a corporation or a company, and large number of people gets involved directly or indirectly in the matter. In such a case, the tribunal (National Company Law Tribunal<\/strong>) cannot deal with every individual case on the same subject matter with regard to one company. Therefore, to handle this matter the Companies Act, 2013<\/strong> has come up with a concept of Class Action Suit. The Class action suit makes sure that numerous aggrieved persons having a standard interest in an exceedingly touch be represented as one unit on a standard platform. This formation as one unit gives them right to sue against and be sued by a corporation or a company. <\/p>\n\n\n\n The class action suits can be brought under section\n245 of the Companies Act 2013<\/em><\/strong>. Class action suits are those suits which\ncan be filed by a large number of people having the same interest instead of\nfiling many individual suits on the same particular subject matter. Whenever\nthe shareholders or creditors\/depositors consider that the management of a\ncompany is having some issues which are prejudicial to the interests of the\nshareholders or depositors or both, in such a case, they can together file a\nclass action suit. In the suit, names of only a few people will be present who\nrepresent the whole group of aggrieved persons.<\/p>\n\n\n\n These class action suits are effectively useful in terms of\nboth time and money. It is beneficial for those individuals who cannot bear the\nexpenses of their own suits. It also saves the time of tribunal to collectively\nhold the numbers of cases in one go. When the group of people is represented by\na specific number of people, every issue of each person can be heard for the\ncommon cause before the tribunal. All the aggrieved parties can share the\nexpenses or costs for the litigation and make it a cost-effective procedure as\na whole.<\/p>\n\n\n\n When the members or depositors are of the opinion that management conducting any affairs of a company which are against the interests of such group of members or depositors, then all can file an application collectively on behalf of all such aggrieved persons before the Tribunal for seeking the relief orders under Section 245(1)<\/strong>. The relief is granted other than under this section if following is violated:<\/p>\n\n\n\n Sub-section (2) of Section 245<\/em><\/strong> states that whenever such\nmembers or depositors seek damages or compensation from the audit firm which is\nresponsible for the fraudulent furnishing of accounts of the company, then the\nliability is not only of the firm; it also extends to every partner who took\npart in such unlawful, wrongful, fraudulent activity.<\/p>\n\n\n\n Section 245 Sub-section (3)<\/em><\/strong> provides about the number of people required for filing an application to bring the suit in action. The requisite number of members or depositors for filing the application under Section 245 sub-section (1)<\/strong> has been clarified through the latest amendment<\/a> in Rule 84 of the National Company Law Tribunal Rules, 2016. This has prescribed the requisite number and hence has given rise to latest amendment of the National Company Law Tribunal<\/a><\/strong> (Second Amendment) Rules, 2019.<\/p>\n\n\n\n According to new amendment, in case of a company\nhaving share-capital, the requisite number is:<\/em><\/strong><\/p>\n\n\n\n In the case of depositors, the requisite number is:<\/em><\/strong><\/p>\n\n\n\n See Our Recommendation:<\/b> Appeal on National Company Law Tribunal Process & Requirement<\/a><\/mark>.<\/p><\/div>\n\n\n\n After the consideration of an application under Section 245 Sub-section (1)<\/strong>, the Tribunal has to consider the following matters, as per provisions of Section 245 Sub-section (4)<\/em><\/strong>, which are:<\/p>\n\n\n\n According to Section 245 Sub-section (5)<\/em><\/strong>, the\nTribunal must look after the following matters after an admission of an application\nwhich is:<\/p>\n\n\n\n Section 245 Sub-section (6)<\/em><\/strong>states that any order passed by the respective Tribunal in regard to the\nclass action suit then it must be binding upon all the members, depositors,\ndirectors, officers, audit firms, audit consultant, experts or any other\npersons who are associated with the company and its mal-practices.<\/p>\n\n\n\n Section 245 Sub-section (7)<\/em><\/strong> states that if a company fails to\ncomply with the order passed by the tribunal, Rs.5 lakhs has to be paid as a\npenalty amount which can be extended upto Rs.25 lakhs for the company as\npenalty. An officer of a company who is\nin default and fails to comply with an order passed by the Tribunal, then he\nmust punished with an imprisonment which may extend to 3 years and also imposing\nof fine, which cannot be less than\nRs.25,000 and may extend upto Rs.1,00,000.<\/p>\n\n\n\n Section 245 Sub-section (8) <\/em><\/strong>states that when the Tribunal gets\nto know that an application filed by members or depositors is frivolous, then\nit may reject the application per se. The Tribunal will record reasons for\nrejection of an application in writing. The tribunal can also impose fine on the\napplicant to pay costs not exceeding Rs.1 Lakhs as a penalty to the opposite\nparty. The amount to be paid is specified in the order passed by the Tribunal.<\/p>\n\n\n\n Section 245 Sub-section (9) <\/em><\/strong>states that procedure cannot be\napplicable to any banking company. Any company other than a banking company is\ncovered under this section of the Act.<\/p>\n\n\n\n Section 245 Sub-section (10)<\/em><\/strong> states that the persons who is filing\nan application or taking any action under sub-section (1) of Section 245 as a\nclass action suit shall complies with all the provisions and requirements that\nare relevantly provided under the Act.<\/p>\n\n\n\n Class action suit is helpful in reducing costs for the people who are aggrieved due to the same cause of action and unable to approach the Tribunal independently for justice. Under the previous Companies Act, there was a concept called ‘oppression and mismanagement’ wherein the suit can be instituted only against the company. But under the Companies Act 2013<\/a><\/strong>, class action suits are a new concept which covers every associated person who involves in an unlawful activity such as auditors, experts, consultants, etc. And they can also be punished. Class action suits increase a sense of responsibility and diligence in the companies with respect to protecting the interests of the stakeholders. This is because the vigilant stakeholders are paid attention to and being addressed by the Tribunal through the class action suit, which is a very good sign for the protection of corporate ethics in the corporate world for upholding fair practices.<\/p>\n\n\n\nWhat is Section 245 of the Companies Act, 2013<\/h2>\n\n\n\n
Types of Relief Granted<\/h2>\n\n\n\n
Minimum Requirement of People for Filing the Application<\/h2>\n\n\n\n
Considerations by the Tribunal<\/h2>\n\n\n\n
Conditions after Admission of a Suit by Tribunal<\/h2>\n\n\n\n
Penalty Against the Non-Compliance of Order<\/h2>\n\n\n\n
Penalties for Baseless Application<\/h2>\n\n\n\n
Conclusions<\/h3>\n\n\n\n