DR.

RAM MANOHAR LOHIYA NATIONAL

LAW UNIVERSITY, LUCKNOW.
2020

CORPORATE LAW

THE REMEDY AGAINST OPPRESSION IS AVAILABLE NOT ONLY TO

MINORITY BUT TO MAJORITY AS WELL
EXAMINE IN THE LIGHT OF CASE LAWS

SUBMITTED TO: SUBMITTED BY:

DR. VISALAKSHI VAGESNA VISHAL KUMAR ARYA
ASSOCIATE PROFESSOR, ROLL NO.170101163
DR. RMLNLU. SEMESTER VI
1
ACKNOWLEDGEMENT

First of all, I would like to thank my teacher of the subject CORPORATE LAW.
DR VISALAKSHI VAGESNA for providing every bit of help and also showing
the way in which to proceed and how to go about the project. I would also like to
thank my parents, friends and others who helped me immensely at every step and
gave every possible bit of help that I needed in preparing the project and making it
look presentable in a good way. I would also like to thank the library staff of
RMLNLU who provided me with books that I needed in making and preparing the
project and other pieces of information and help that was required. At last I would
like to sincerely thank God who gave me the much needed strength and power to
go ahead with the project and make it in a presentable way.
 TABLE OF CONTENTS

. INTRODUCTION

. WHO CAN APPLY

. MEANING OF OPPRESSION

. CONDITION OF GRANTING RELIEF

. OPPRESSION OF MAJORITY

. BIBLIOGRAPHY
 INTRODUCTION
Oppression is the exercise of authority or power in a burdensome, cruel, or
unjust manner It can also be defined as an act or instance of oppressing, the
state of being oppressed, and the feeling of being heavily burdened, mentally
or physically, by troubles, adverse conditions, and anxiety.

Under section 241(1)(a) any member has a right to apply the Tribunal if the affairs
of the company have been or are been conducted in a manner prejudicial to public
interest or oppressive to him or any member are members of the company or
prejudicial to the interest of the company. It may be noted that even the past affairs
are also covered by the class relief may be granted by the tribunal against past acts
of oppression.

WHO CAN APPLY-

The first remedy in the hands of an oppressed minority to move the Tribunal.
Whenever the affairs of an company are being conducted in a manner oppressive to
any member or members of prejudicial to public interest, an application can be
made to the company law tribunal under section 241. 1There are requisite numbers
of member who must sign the application is given in section 244. Where the
company is with his share capital , the application must be signed by at least
hundred members of the company all by one tenth of the total numbers of its
members, whichever is less or by any member or members holding one tenth of the

1
Singh Avtar .Company Law(Lucknow:Eastern Book Company)
issued share capital of the company .2if the company is without share capital, the
application has to to be signed by one fifth of the total number of its members.
Joint holders are considered as one member.

However, if the tribunal may, an application, allows any member aur members to
sue who." if in its opinion circumstances exist which make it just and equitable to
do so.3 A person applied to the company on payment of rupees 20 crore for 40%
shares in the company. The company in its balance sheet show the amount as share
application money pending allotment. The amount was used to fund companies
project. the company treated the investor as a share holder. The code regarded him
as member under section 41(2) 2 of the 1956 Act(S. 2(55) 2013 ACT.

For the purpose of filing a petition for prevention of oppression the court overload
in the realities of the case the fact of no allotment or no entry in the register of
members.

Once the consent of the requisite number is obtained, the application may be made
by one or more of them on behalf of and for the benefit of all of them. That term
consent for this purpose means as defined in section 13 Contract Act, an agreement
upon the same thing in the same sense. According to Madras High Court rejected a
petition because the the consenting members were only told that their signatures
were needed for requisitioning a meeting. The signatories must be told of specific
facts which were arranged to be as constituting and oppression . There cannot be a
blanket consent.

2
TNK Govindaraju Chetty&Co v Kadri Mill – the percentage is to be taken on the basis of position before the
increase of capital which has been questioned and which has been reduced to the percentage of petitioner.

3
S 244(1). Provisio.
It has been held by the supreme court in in Rajahmundry Electric supply corp
ltd. v A Nageshwara Rao4 that if some of the Consenting members have,
subsequent to the presentation of the application, withdrawn their consent it would
not affect the right of the applicant to proceed with the application. By holding
that Where petition has been properly presented it does not cease to the
maintainable merely because three of the the applicant have transferred their shares
and see to the shareholder of the company.

All the material facts should be set out in the petition itself. Allegations of fraud,
malafide. Etc must be supported with particulars.

Supporting facts cannot be brought in subsequently..

The meaning of member is to be understood in its widest import so as to include

persons whose name through not borne out by register of members, they have an
indesfeasible right to share. There was vesting of share with the petitioner
consequent upon schemes of amalgamation sanctioned by court. It wasw held that
there was no further act or deed necessary to entitle him to exercise his right of
petition.

The employees of a company howevrmuch they may be treated like members or

are members also cannot get any relief under this jurisdiction in their capacity as
employees.

Once entertained a petition under the section can be compromised or withdrawn

only with the sanction of the tribunal.THE Compromised should be in the best
interest of the company and shareholders.

4
AIR 1956 SC213 ; (1956)26 COMP CAS 91
Meaning of oppression-

The meaning of term oppression as explained by lord cooper in the Scottish case of
ELDER V ELDER &WATSON LTD, was cited with the approval by
WANCHOO .(OF THE SUPREME COURT IN SHANTI PRASAD JAIN V
KALINGA TUBES LTD).

The essence of the matter seems to be that the conduct complained of should at the
lowest involve a visible departure the standards of fail dealings and a violation of
the condition of fair play on which every shareholder who entrusts his money to
company is entitled to rely.5

In the above mentioned case the company were removed by majourity from
directorship and also from their employment .

The petition failed because they had not suffered as shareholders but in different
capacities..

5
Companies Act, 1956
Conditions for Granting Reliefs

To obtain relief under section 241 the following conditions should be satisfied:-

1. There must be “oppression”- The Punjab and Haryana High Court in Mohan Lal
Chandmall v. Punjab Co. Ltd6 has held that an attempt to deprive a member of his
ordinary membership rights amounts to “oppression”. Imposing of more new and
risky objects upon unwilling minority shareholders may in some circumstances
amount to “oppression”. However,7 minor acts of mismanagement cannot be
regarded as “oppression”. The Court will not allow that the remedy under Section
241 becomes a vexatious source of litigation. But an unreasonable refusal to
accept a transfer of shares held as sufficient ground to pass an order .8Thus to
constitute oppression there must be unfair abuse of the powers and impairments of
the confidence on the part of the majority.

2. Facts must justify winding up- It is well settled that the remedy of winding up is
an extreme remedy. No relief of winding up can be granted on the ground that the
directors of the company have misappropriated the company’s fund, as such act of
the directors does not fall in the category of oppression or mismanagement.To
obtain remedy the petitioner must show the existence of facts which would justify
the winding up equal order.

6
AIR 1961 Punj. 485
7
Re, Hindustan Cooperative Insurance Society Ltd.,(1961) 31 Comp. Cas. 193.
8
Gajabai v. Patni Transport Co.,(1965) 2 Comp. L. J. 234
3. The oppression must be continued in nature – Thus to prove oppression
continuation of the past acts relating to the present acts is the relevant factor ,
otherwise a single act of oppression is not capable to yield relief.

4. The petitioners must show fairness in their conduct-It is settled legal principle
that the person who seeks remedy must come with clean hands. The members
complaining must show fairness in their conduct. For ex-Mere declaration of low
dividend which does not affect the value of the shares of the petitioner ,was neither
oppression nor mismanagement in the eyes of law.9

5. Oppression and mismanagement should be specifically pleaded- It is settled law

that , in case of oppression a member has to specifically plead on five facts:-

a) what is the alleged act of oppression ;

b) who committed the act of oppression;

c) how it is oppressive;
9
Jaledhar Chakraborty v. Power Tools Appliances Co. Ltd.,(1994) 79 Comp. Cas. 505
d) whether it is in the affairs of the company;

e) and whether the company is a party to the commission of the act of oppression.10

10
Dinesh Sharma and another v. Vardeen Agrotech (P.)Ltd. and others ,(2007) 1 Comp. L.J. 155 (CLB)
OPPRESSION OF MAJORITY-

It should not, However, be supposed that these special remedies against

oppression aur mismanagement available only to minorities.

In an appropriate case if the court is satisfied about the acts of oppression OR

mismanagement, relief can be granted even if application is made by a majority,
who have been rendered completely in effective by the wrong acts of a minority
group.

A petition is not liable to be struck out as showing no reasonable cause of action

just only because it is filled by a majority shareholder.11

Accordingly relief under the section was allowed to a majority group by

MITRA J of the Calcutta High Court,Sindri Iron Foundry (p) Ltd, re.12 The
learned judge observed that the court finds that the company's interest is being
seriously prejudice by the activities of one or the other group of shareholders, that
two different registered offices at two different addresses have been setup, that two
Rival boards are holding meeting, that the company's business, property and assets
have passed to the hands of an authorised person who have taken wrongful
possession and who claim to be the shareholders and directors, there is no reason

11
Baltic real estate Ltd No 1, re 1993 BCLC 498 CH-D -The court adding that things like removing director from
office which can be set right by using majourity power, should better be accomplished at the level.
12
(1963)69 CWN 118
why why the court should not make appropriate orders to put an end to such
matters.

The same fact situation was presented before a bench of Calcutta High Court in
Ramashankar prasad v Sindri Iron Foundry (p) Ltd . 13

Referring to the arguments that the the right to apply under section 397 398 must
we can find two cases where the complaint it is by a minority against a majority
and not vice versa MITTER said-

SECTION 399( NOW SEC 244) is a code by itself as to the qualification

necessary for application under section 399 and 398 (NOW SEC 241). I see no
reason for holding that section 319 was only aim at finding the lower limit of
qualification of Any share holder or group of shareholders complaining of
oppression and mismanagement.

If the legislature has fixed a lower limit but no upper limit and if the object of the
section be to prevent mischief. I see no reason why upper limit should be implied
so as to bring in section in line with the English section.14

Referring to the arguments that the majority could always call a meeting and put
things in order by passing Re solutions, the learned judge said-

The fact in this case shows very clearly, that there is no chance of redressal in the
domestic forum of a company. If a board meeting was to be called, one group

13
(1966)1 comp LJ 310.
14
S.210 (ENGLISH )COMPANIES ACT , Appeared under the heading” minorities”but it is nowhere mentioned in
section.
would contain that there was five directors whereas the other group would urge
that there was seven.

If a meeting of shareholders has to be convened according to one group there

would be only 16 shareholders while according to the other number would exceed
25.. That there would be complete Chaos and confusion.

Even where the whole number of member is suffering relief may be allowed to the
complaining member because some member may suffer more than other may do.

Where the complaint was on the basis of an unfairly low dividend and though all
members may suffer alike the court said that the word interest is a wider terms than
rights and that the the members of a company may have varying interest though
there right might be the same. Course of conduct may affect all the members
equally and all may be prejudiced, yet some of them only maybe prejudiced
unfairly. Low dividends may cause extra ordinary prejudice to some members
only.

In exceptional cases legitimate Expectations might arise on the part of petitioner

outside the terms of formal agreements entered into between the parties. 15

An agreement to conduct the affairs of the company in a particular manner may be

outside the articles. It will support a petition if the agreement is broken by those
conducting the affairs of the company. 16

15
A Company (002015 of 1996)re (1997) 2 BCLC1
16
Anderson v Heogg ,2000 Slt 634
Even where majority shareholder suffering at the hands of minority the courts are
usually very reluctaant in order in the majority to sell out to the minority. Such an
order may be passed only exceptionally. Generally the minority shareholders will
be required to sell to the majority..17

Albert David Ltd, re (1968) where it was observed that it is against the principle
of company law that the minorities should carry on the management without any
election as provided in the Act and the majority of shareholders should be kept out
of Management. though it is unusual to ask the majority to sell itself to the
minorities petition by the majority is maintainable...Delhi High Court in Suresh
Kumar Sanghi v Supreme Motors (1983).

The exception in ordering the majority to sell out minority is in deepak Lohia vs
Kamrup private Limited add (2003). Private Memorandum of agreement not
enshrined in the company's article not taken to be binding but could provide some
help in moulding, manipulation head become irretrievably deep to be cured and
therefore directions issued for purchase of shares of majority group by minority
group.

17
Mahabir Prasad JalN V Bajrang Prasad Jalan (1966)2 comp Lj 71 (CAL)
Bibliography

1. Singh Avtar .Company Law(Lucknow:Eastern Book Company) 2008.

2. Kapoor N.D. Elements of Mercantile Law(New Delhi:Sultan Chand and Sons)

2009.

3. Tripathi S.C. Modern Company Law (Allahabad:Central Law Publications)

2006.

4. Saharay H.K. Company Law (New Delhi:Universal Law Publishing Company

Pvt. Ltd) 2008.

LINKS-

1. https://taxguru.in/company-law/oppression-mismanagement.html
2. http://www.legalservicesindia.com/article/482/Prevention-of-oppression-&-
mismanagement.html