6 Oppression & Mismanagement
(Section 241 to Section 246)
Special Note: - Students are advised to also refer to different Case Laws along with their names in this
chapter, which have been provided in last in Question answer form
6.1 Section 241- Application to Tribunal for relief in cases of oppression, etc.
(1) Any member of a company who complains that—
(a) the affairs of the company have been or are being conducted in a manner
• prejudicial to public interest or
• prejudicial or oppressive to him or any other member or members or
• prejudicial to the interests of the company;
or
1. Case law of [Re Ballador Silk Ltd.]
If majority director over-ride minority, no resort u/s 241
2. Case law of [Gnana Sambhandem v Tamilnad Transporters (Coimbatore) Pvt. Ltd]:-
Oppression only if affairs are being conducted in manner oppressive to shareholders or someone in
a position that can oppress someone.
3. Case law of [Dale & Carrington Investment Pvt. Ltd v P.K. Prath Pan]
If object is to attain majority/control without intimating others, an act of oppression.
4. Case law of [V. Sebastean v City Hospital]
If majority prevented from protecting itself, majority become artificial minority & can claim
protection u/s 241.
(b) the material change, whether by an alteration in the Board of Directors, or manager, or in the ownersh ip
of the company’s shares, or
if it has no share capital, in its membership, or in any other manner whatsoever, and
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that by reason of such change, it is likely that the affairs of the company will be conducted in a manner
prejudicial to its interests or its members or any class of members,
may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under
this Chapter.
(2) The Central Government, if it is of the opinion that the affairs of the company are being condu ct ed in a
manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.
(3) Where in the opinion of the Central Government there exist circumstances suggesting that––
(a) any person concerned in the conduct and management of the affairs of a company is or has been in
connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his
obligations and functions under the law or of breach of trust;
(b) the business of a company is not or has not been conducted and managed by such person in accordance
with sound business principles or prudent commercial practices;
(c) a company is or has been conducted and managed by such person in a manner which is likely to cause,
or has caused, serious injury or damage to the interest of the trade, industry or business to which such
company pertains; or
(d) the business of a company is or has been conducted and managed by such person with intent to defraud
its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a
manner prejudicial to public interest,
the Central Government may initiate a case against such person and refer the same t o t h e T ribu n al wit h a
request that the Tribunal may inquire into the case and record a decision as to whether or not such person is
a fit and proper person to hold the office of director or any other office connected with the conduct and
management of any company.
(4) The person against whom a case is referred to the Tribunal under sub-section (3), shall be joined as a
respondent to the application.
(5) Every application under sub-section (3)––
(a) shall contain a concise statement of such circumstances and materials as the Central Government may
consider necessary for the purposes of the inquiry; and
(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908, for the
signature and verification of a plaint in a suit by the Central Government.
Some Extra Concepts
1. In an application filed to the Tribunal, claiming oppression, a shareholder who is also the
director of the company cannot claim compensation by way of salary paid to other directors.
Shareholders can share the dividend of the company, if it is declared but cannot seek directions
to be compensated. The payment of salary is a question that concerns the Board of Directors and
not the Tribunal.
2. Failure to declare dividend does not amount to oppression. (Thomas Veddon V.J. (v) Kuttanad
202
(Section 241 to Section 246)
Special Note: - Students are advised to also refer to different Case Laws along with their names in this
chapter, which have been provided in last in Question answer form
6.1 Section 241- Application to Tribunal for relief in cases of oppression, etc.
(1) Any member of a company who complains that—
(a) the affairs of the company have been or are being conducted in a manner
• prejudicial to public interest or
• prejudicial or oppressive to him or any other member or members or
• prejudicial to the interests of the company;
or
1. Case law of [Re Ballador Silk Ltd.]
If majority director over-ride minority, no resort u/s 241
2. Case law of [Gnana Sambhandem v Tamilnad Transporters (Coimbatore) Pvt. Ltd]:-
Oppression only if affairs are being conducted in manner oppressive to shareholders or someone in
a position that can oppress someone.
3. Case law of [Dale & Carrington Investment Pvt. Ltd v P.K. Prath Pan]
If object is to attain majority/control without intimating others, an act of oppression.
4. Case law of [V. Sebastean v City Hospital]
If majority prevented from protecting itself, majority become artificial minority & can claim
protection u/s 241.
(b) the material change, whether by an alteration in the Board of Directors, or manager, or in the ownersh ip
of the company’s shares, or
if it has no share capital, in its membership, or in any other manner whatsoever, and
201
, Oppression & Mismanagement Chapter 6
that by reason of such change, it is likely that the affairs of the company will be conducted in a manner
prejudicial to its interests or its members or any class of members,
may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under
this Chapter.
(2) The Central Government, if it is of the opinion that the affairs of the company are being condu ct ed in a
manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.
(3) Where in the opinion of the Central Government there exist circumstances suggesting that––
(a) any person concerned in the conduct and management of the affairs of a company is or has been in
connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his
obligations and functions under the law or of breach of trust;
(b) the business of a company is not or has not been conducted and managed by such person in accordance
with sound business principles or prudent commercial practices;
(c) a company is or has been conducted and managed by such person in a manner which is likely to cause,
or has caused, serious injury or damage to the interest of the trade, industry or business to which such
company pertains; or
(d) the business of a company is or has been conducted and managed by such person with intent to defraud
its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a
manner prejudicial to public interest,
the Central Government may initiate a case against such person and refer the same t o t h e T ribu n al wit h a
request that the Tribunal may inquire into the case and record a decision as to whether or not such person is
a fit and proper person to hold the office of director or any other office connected with the conduct and
management of any company.
(4) The person against whom a case is referred to the Tribunal under sub-section (3), shall be joined as a
respondent to the application.
(5) Every application under sub-section (3)––
(a) shall contain a concise statement of such circumstances and materials as the Central Government may
consider necessary for the purposes of the inquiry; and
(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908, for the
signature and verification of a plaint in a suit by the Central Government.
Some Extra Concepts
1. In an application filed to the Tribunal, claiming oppression, a shareholder who is also the
director of the company cannot claim compensation by way of salary paid to other directors.
Shareholders can share the dividend of the company, if it is declared but cannot seek directions
to be compensated. The payment of salary is a question that concerns the Board of Directors and
not the Tribunal.
2. Failure to declare dividend does not amount to oppression. (Thomas Veddon V.J. (v) Kuttanad
202
