JAMIA MILLIA ISLAMIA

FACULTY OF LAW

CORPORATE LAW-II PROJECT

TOPIC :-)
MINORITY RIGHTS OF SHAREHOLDERS

Submitted To
Ms. Mona Arya
Guest Faculty

Faculty of Law
Jamia Millia Islamia

Submitted By
Abdul Karim
Roll No. – 03
Student Id: 201904923

B.A.LL. B (Self Finance),

7th Semester

Batch: - 2019-24
INDEX
• PROTECTION OF MINORITY SHAREHOLDERS
o Rule in “Foss v. Harbottle”
o Acts ulra vires
o Fraud on Minority
o Acts requiring special Majority
o Wrongdoers in Control
o Individual Membership Rights.
• PREVENTION OF OPPRESSION AND MISMANAGEMENT
o Prevention of Oppression [S.241]
o Meaning of Oppression
o Powers of Tribunal [S.242]
o Class Action [S.245]
o Who can apply [S. 245(3)
o Factors to be considered by Tribunal [S. 245(4)]
o Penal clause [S. 245(7)]
• BIBLIOGRAPHY
Protection of Minority Shareholders

The modern Companies Act contain a large number of provisions for the protection of the
interest of investors in incorporated companies. The aim of these provisions is to require those
who control the affairs of a company to exercise their powers according to certain principles
of natural justice and fair play.

RULE IN "FOSS v HARBOTTLE"

The basic principle relating to the administration of the affairs of a company is that the court
does not, at the instance of a shareholder, interfere in the administration of the company by its
directors. This is known as the rule in Foss v Harbottle.1 In this case certain shareholders had
brought an action against the directors to force them to make good the loss they had caused to
the company by their illegal and fraudulent transactions. The action was dismissed in respect
of matters which a majority of the shareholders had the power to confirm. Thus the rule is: (1)
that for any wrong done to the company either by directors or by outsiders, the proper plaintiff
is the company itself; and (2) where the alleged wrong is a transaction which the majority can

1
(1843) 2 Hare 461: 67 ER 189.
affirm, it is no use having litigation about it the ultimate end of which is going to be that a
meeting has to be called and the wishes of the majority will prevail.

The briefest possible statement of the rule occurs in the observation of CARDOZO J that for
erring (directors or) shareholders there may be absolution if the shareholders are satisfied. 2 The
two recent English cases, Hogg v Cramphorn Ltd3 and Bamford v Bamford4 bear witness to
this absolving power of majority shareholders. In either case there was the disposal by the
directors of the unissued capital of the company as a tactical move in the battle for control of
the company. The court conceded that the power to allot shares was exercised for an improper
motive and the directors were guilty of misfeasance, but held that it is a common place of
company law that the directors can by making a full and frank disclosure and calling together
the general body of the shareholders obtain absolution and forgiveness of their sins.

There are, however, certain situations in which a shareholder may sue to enforce obligations
owed to the company. He brings the action as a representative of the corporate interest. In the
American literature a representative action of this kind is called the "derivative action". Such
situations are as follows:

1. Acts ultra vires. -Every shareholder can restrain the company from acting ultra vires. A
shareholder can also sue to recover the assets of the company from any person to whom they
have been given in an ultra vires transaction and also the directors responsible for the
transaction.5 In this case one of the object of the appellant company was: “To advance money
at interest rate on the security of land, houses, machinery and other property situated in
India…” the company made several investments without adequate security and thus contrary
to the provisions of the memorandum. The plaintiff respondent prayed to the court for perpetual
induction to restrain it from making such investments. The court observed as follows: “The
broad rule in such cases is no doubt that in all matters of internal management of a company,
the company itself is the best judge of its affiars and the court could not interfere. But the
application of the assets of a company is not a matter of mere internal management. It is alleged
that directors are acting ultra vires in their application of the funds of the company.

2
McCandles v Furland, 80 L Ed 121: 296 US 140, 157 (1935).
3
(1967) 1 Ch 254: (1996) 3 WLR 995.
4
1970 Ch 212: (1969) 2 WLR 1107 (CA).
5
Bharat Insurance Co Ltd v Kanhaiya Lal, AIR 1935 Lah 792.
In case of ultra vires acts a shareholder can bring either a personal action based upon the
company’s breach of its memorandum or derivative action based upon the wrong done to the
company by those who have caused it to act ultra vires. The plaintiff’s own conduct is such
cases must be proper. In Lowe v. Fahey,6 it was held that in cases of diversion of funds for
extraneous purposes, the court had jurisdiction to pass an order for repayment to the company
against the guilty members and directors as well as against third persons who had knowingly
received such money improperly assisted the wrongful diversion.

2. Fraud on minority. The conduct of a majority of shareholders can be impeached if it

constitutes a "fraud on the minority". This phrase refers to such a conduct of the majority which
has the effect of discriminating between the majority shareholders and minority shareholders,
so as to give to the former an advantage of which the latter were deprived. Thus, in Menier v
Hooper's Telegraph Works,7 the majority shareholders were not permitted to sacrifice the
rights of the company in favour of another company in which they had an interest.

Similarly, the majority cannot be allowed to expropriate the interest of minority shareholders.
Thus, the holder of 2 per cent interest in a company was not allowed to be compelled at the
pain of confiscation of his interest to contribute further capital. 8

Thus, it appears that the majority powers must be exercised in good faith for the benefit of the
company as a whole. "Individual interest may be sacrificed to the economic exigencies of the
enterprise and the judgment of directors as to this must prevail." Thus, the majority of a
company were permitted to acquire the interest of competing members. 9 Where a similar power
was taken in reference to members who refused to buy the company's products, that was held
to be improper as the action was beyond what was necessary for protecting the company's
interests.10

But all this is subject to the principle which still holds ground that the right to vote is the private
property of the older and, therefore, he "may vote as he pleases even when his interests are

6
(1996) BCLC 262 Ch. D.
7
(1874) LR 9 Ch App 350.
8
Brown v British Abrasive Wheel Co Ltd, (1919) 1 Ch 290.
9
Sidebottom v Kershaw Leese & Co, (1920) 1 Ch 154 (CA)
10
Dafen Tinplate Co Ltd v Llanely Steel Co, (1920) 2 Ch 124.
different from or opposed to those of the company. Shareholders are not trustees for the
company or for one another and the relations between them cannot be identified with relations
between partners".11

The present trend is towards a principle that any breach of duty which causes loss to company
should be regarded as a fraud on the minority. The sale of a company's property below its
natural market value was held to be a fraud.

Minority shareholders can sue majority shareholders if the latter have been guilty of gross
negligence and profited from that negligence notwithstanding the absence of fraud. The
plaintiffs who were minority shareholders brought an action against the company and two of
its directors, who were the majority shareholders. They alleged that in 1970 the company, on
the instructions of the two directors, had sold the company's land to one of the two, who was
the wife of the other, for £4250 when they knew or ought to have known that it was worth a
great deal more. It was resold in 1974 for £1,20,000. It was held that the minority shareholders
had a cause of action.12

3. Acts requiring special majority. There are certain acts which can only be done by a special
resolution. If the majority purport to do any such act by passing only an ordinary resolution or
in a different manner than required by the law, any member can bring an action to restrain the
majority.
In Dhakeshwari Cotton Mills Ltd. v. Nilkamal Chakravarty,13 a resolution was passed by the
statutory majority. The plaintiff complained to the company but the company did not take steps
in the matter. The plaintiff filled the suit. The court held that the plaintiff who was a minority
shareholder could bring a suit.

4. Wrongdoers in control. -Sometimes an obvious wrong may be done to the company, but
the controlling shareholders would not permit an action to be brought against the wrongdoer
or they themselves being the wrongdoers, would not enforce the company's right. Thus, where

11
Public Trustee v Rajeshwar Tyagi, (1973) 43 Comp Cas 371 (Del).
12
Daniels v Daniels, (1978) 2 WLR 73.
13
(1973) 7 Comp. Cas. 417 (Cal.).
the majority shareholders had converted the company's assets to their own use, minority action
was allowed.14
In Satya Charan v. Rameshwar Prasad Bajoria,15 it was held that ordinarily, only directors
can conduct litigation in the name of the company, but when they themselves are wrongdoers
against the company and have acted mala fide or beyond their powers and their personal interest
is in conflict with their duty in such a way that they cannot or will not take steps to seek redress
for the wrong done to the company, the majority of the shareholders can bring an action.

5. Individual membership rights. Every member has vested in him certain rights conferred
by the Act or by the constitution of the company and which are called individual membership
rights. The ordinary examples are the right to vote, the right to have his vote recorded or his
right to stand for directorship at an election. Where a director refused to retire in accordance
with the articles, a shareholder was allowed to sue "as the individual rights of the plaintiff as a
member were invaded". 16
In Joseph v. Jos,17 a meeting of a company was held, and it was decided to elect some directors
by separate elections. The plaintiff contested the elections and was defeated. He was proposed
a candidate again to fill up the second vacancy. But the chairman, on account of his defeat for
the first vacancy disqualified him. The plaintiff filed a suit against the chairman. The Kerala
High Court held that the proceedings of the meeting as regards the election of directors null
and void.

14
Glass v Atkin, (1967) 65 DLR (2d) 501.
15
(1950) 20 Comp. Cas. 39 (FC).
16
Karus v Lloyd Property Ltd, 1965 WR 232; noted 30 Mod LR 78.
17
AIR (1964) 1 Comp Cas.
PREVENTION OF OPPRESSION AND MISMANAGEMENT

Chapter XVI of Part 1 of the Act provides for judicial as well as administrative remedies for
relief against oppression and mismanagement. [Ss. 241-246]

PREVENTION OF OPPRESSION [S. 241]

Who can apply [S. 244]. -The first statutory remedy in the hands of the oppressed shareholder
is to move the Tribunal. The application must be signed by at least 100 members of the
company or by one-tenth of the total number of its members, whichever is less, or by any
member or members holding one-tenth of the issued share capital of the company. Joint holders
of shares are to be counted as one. If the company is without share capital, the application
should be signed by one-fifth of the total number of its members. Once the requisite number
has signed the application, the application may be proceeded with, even if some of the
signatories have withdrawn their consent 18 or disposed of their shares.19 A person who is
entitled to have his name entered in the company's register of members, may apply for relief,20
and so also the representative of a deceased shareholder.21 The Central Government has also
the power to apply. [S. 241(2)] The Tribunal may, on application, authorise a lesser number of
members to apply. [S. 241]

The conduct of the petitioner is an important factor in the matter of the relief that he deserves.
Generally he would be required to move out of the company at a fair value being put upon his
stakes in the company.

18 Rajahmundry Electric Supply Corpn Ltd v A Nageshwara Rao, (1956) 26 Comp Cas 91: AIR 1956 SC 213;
Bhagwati Developers (P) Ltd v Peerless General Finance & Investment Co Ltd, (2013) 5 SCC 455: (2013) 178
Comp Cas 1, the requirement of 10 per cent shareholding can be fulfilled by obtaining consent of other
shareholders. Consent can also be given through power of attorney. Consent need not be in writing, nor necessary
to annex it to petition. If the petitioning shareholders withdraws petition, the consenting shareholders can continue
it.
19
Bhagwati Developers (P) Ltd v Peerless General Finance & Investment Co Ltd, (2013) 5 SCC 455.
20
Stadmed (P) Ltd v Kshetra Mohan, AIR 1968 Cal 572.
21
Bayswater Trading Co, re, (1970) 1 WLR 343.
Meaning of oppression.- The grounds on which an application can be made under Section 241
are: (a) that the affairs of the company are being conducted in a manner prejudicial or
oppressive to a member or some members or in a manner which is prejudicial to the public
interest or in a manner prejudicial to the interests of the company; (b) a material change has
taken place in the management or control of the company, whether by an alteration in the Board
of Directors, or manager, or in the ownership of the company's shares or its membership (it
being without share capital), or in any other manner whatsoever and 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. The Tribunal may then make such an
order "with a view to bringing to an end the matter complained of as it thinks fit."

The circumstances in which oppression may arise are so "infinitely various that it is impossible
to define them with precision". The noble attempt by Lord COOPER to define the expression
in the Scottish case of Elder v Elder & Watson Ltd22 was cited with approval by WANCHOO
J (afterwards CJ) of the Supreme Court of India in Shanti Prasad Jain v Kalinga Tubes Ltd.23
"The essence of the matter seems to be that the conduct complained of should at the lowest
involve a visible departure from the standards of fair dealing, and a violation of the conditions
of fair play on which every shareholder who entrusts his money to the company is entitled to
rely."24 The complaining shareholder must be under a burden which is unjust or harsh or
tyrannical. "A persistent and persisting course of unjust conduct must be shown." Thus, where
the majority shareholders of an insurance company whose business had been acquired tried to
force new and more risky objects upon an unwilling minority, where the non-trading members
of a company were deprived of their right to vote, to elect directors and to receive dividends, 25
where the need of a subsidiary company ceased to exist, and its parent company adopted the
policy of running down its business which depressed the value of its shares,26 where a majority
controller persistently flouted the decisions of the Board and made it impossible for the
company to function,27 where there was an unreasonable refusal to accept a transfer or
transmission of shares,28 oppression was held to have been established and the appropriate
relief was granted.

22
1952 SC 49 (Scot).
23
AIR 1965 SC 1535.
24
Chatterjee Petrochem (India) (P) Ltd v Haldia Petrochemicals Ltd, (2011) 10 SCC 466.
25
Mohanlal Chandumal v Punjab Co Ltd, AIR 1961 Punj 485.
26
Scottish Coop Wholesale Society Ltd v Meyer, 1959 AC 324.
27
HR Harmer Ltd, re (1959) 1 WLR 62 (CA).
28
Gajarbai v Patni Transport Co, (1965) 2 Comp LJ 234.
But where there were broad charges like this that ticketless travelling on the company's buses
was not checked, or that second-hand buses were sold at a low price,29 or that the managing
director had been unwise, inefficient, and careless in the performance of his duties, 30 or that
the majority had offered further issue of shares to outsiders only to strengthen their own
following in the company and in violation of a private agreement between the groups in control
that an equilibrium of voting power should be maintained,31 these did not amount to oppression.
In a case before the Supreme Court irregularities were committed by the management of a
company in offering the block of rights shares to its own foreign holding company. The result
was that the holding company was not able to participate in crucial meetings. Its block of shares
was allotted to others. Even otherwise it would not have been able to participate in the rights
issue because of statutory restrictions. The Supreme Court held that there was no oppressive
policy in evidence. The company's real loss lay in the fact that the market value of the shares
was higher than their nominal value and the allotment was at par. The court ordered that the
Indian allottees of such shares should pay the difference to the holding company. 32 Similarly,
in Jermyn Street Turkish Baths Ltd, re,33 the court ignored serious irregularities in the face of
the practical successes of the Controller. Where a merger between a holding company and its
subsidiary was in the interest of both companies and no prejudice was caused either to public
interest or shareholder interest, the proposal was not allowed to be questioned on the ground
of oppression.34 Unwise, inefficient or careless conduct of a director cannot give rise to a claim
for relief under this section. 35

A member can complain of oppression only in his capacity as member and not as director.
Contractual relations between the company and its members are not within the purview of the
relevant provisions, they being not conferring any membership rights. Hence, breach of
contract with a member committed by the majority shareholder of the company was held to be
not an act of oppression.36 The remedy can be availed of by a majority of shareholders as well
if, in the circumstances of the case, they have been completely nullified by the minority in

29
Lalita Rajya Lakshmi v Indian Motor Co, AIR 1962 Cal 127.
30
Five Minutes Car Wash Service Ltd, re, (1966) 1 WLR 745.
31
Shanti Prasad Jain v Kalinga Tubes Ltd, (1965) 1 Comp LJ 193.
32
Needle Industries (India) Ltd v Needle Industries Newey (India) Holding Ltd, (1981) 3 SCC 333.
33
(1970) 1 WLR 1194 (CA).
34
ANCO Batteries Ltd, re, 2009 SCC OnLine Kar 358.
35
Chatterjee Petrochem (India) (P) Ltd v Haldia Petrochemicals Ltd, (2011) 10 SCC 466.
36
Incable Net (Andhra) Ltd v AP AKSH Broadband Ltd, (2010) 6 SCC 719.
control.37 This ingenious remedy has not only permitted redress of many abuses, but its mere
availability has had a deterrent effect upon the management.

For relief against mismanagement, it has to be established that the affairs of the company are
being conducted in a manner prejudicial to the interest of the company or public interest or
that, by reason of a change in the management or control of the company, it is likely that its
affairs will be conducted in that manner. The Tribunal may make an appropriate order. Relief
against mismanagement was provided by the Supreme Court in Rajahmundry Electric Supply
Corpn Ltd v A Nageshwara Rao,38 and Richardson and Crudas Ltd v Haridas Mundra.39
Where directors preferred objects of their liking and made a huge allotment of shares for a
consideration other than cash, this was held to be a mismanagement of affairs. 40

There should be present and continuing mismanagement. The charges of mismanagement in

the past, even if proved, are not enough to establish an existing injury to the interest of the
company or public interest. Events subsequent to the date of petition are also not to be taken
into account. The mere fact of business losses does not by itself show either oppression or
management.

Relief against mismanagement runs in favour of the company and not to any particular member
or members. Secondly, it is not necessary for the Tribunal to find cause for winding up in cases
of mismanagement in order to grant relief. Thirdly, the provision enables the Tribunal to take
into consideration outside interests. Thus, the Calcutta High Court refused to order the winding
up of a grossly mismanaged company and appointed special officers to manage it because the
company was engaged in special industries necessary for the implementation of the country's
plans.41

POWERS OF TRIBUNAL [S. 242]

If on any application made under Section 241, the Tribunal is of the opinion (a) that the
company's affairs have been or are being conducted in a manner prejudicial or oppressive to

37
Sindhari Iron Foundry (P) Ltd, re, (1963) 68 CWN 118.
38
AIR 1956 SC 213.
39
(1959) 29 Comp Cas 547.
40
Akbarali A. Kalvert v Konkan Chemicals (P) Ltd, (1997) 88 Comp Cas 245 (CLB).
41
Sindhari Iron Foundry (P) Ltd, re, (1963) 68 CWN 118.
any member or members or prejudicial to public interest or in a manner prejudicial to the
interests of the company; and (b) that to wind up the company would unfairly prejudice such
member or members, but that otherwise the facts would justify the making of a winding up
order on the ground that it was just and equitable that the company should be wound up, the
Tribunal may, with a view to bringing to an end the matters complained of, make such order
as it thinks fit.

The Tribunal has the power to make any order for the regulation of the conduct of the
company's affairs and upon such terms and conditions as it thinks fit. Sub-section (2) provides
that without prejudice to the generality of the powers under sub-section (1), the Tribunal's order
may provide for: (a) The regulation of the conduct of the company's affairs in the future. Thus,
for example, in LIC v Haridas Mundhra42 a special officer with an advisory board was
appointed to the exclusion of the shareholders. (b) The purchase of the shares or interest of any
members of the company by other members or by the company. (c) In the case of purchase of
shares by the company, the consequent reduction of capital. (d) Restrictions on transfer or
allotment of shares of the company. (e) The termination or modification of an agreement
between the company and any managerial personnel. (f) The termination or modification of
any agreement with any person, provided due notice has been given to him and his consent
obtained. (g) Setting aside any fraudulent preference made within three months before the date
of the application. (h) Removal of the managing director, manager or any of the directors of
the company. (i) Recovery of undue gains made by any managing director, manager or director
during the period of his appointment as such and the manner of utilisation of recovery including
transfer to Investor Education and Protection Fund or repayment to identifiable victims. (j) The
manner in which the managing director or manager of the company may be appointed
subsequent to an order removing the existing managing director or manager. (k) Appointment
of such number of persons as directors who be may required by the Tribunal to report to it on
such matters as the Tribunal may direct. (1) Imposition of costs as may be deemed fit by the
Tribunal. (m) Any other matter for which, in the opinion of the Tribunal, it is just and equitable
that provision should be made.

42
AIR 1959 Cal 695.
The managerial personnel whose contract is set aside shall not be entitled to damages or
compensation, nor capable of serving the company in any managerial capacity for a period of
five years except with the leave of the Tribunal. [S. 243]

The powers under the section are not affected by the existence of an arbitration clause though
the matter may be referred to arbitration pending further action. An agreement cannot arrogate
to the arbitrator the question whether a winding up order should be made, which remains a
matter for the Tribunal to decide in any subsequent proceedings. But the arbitrator can decide
whether the complaint for an unfair prejudice is made out and whether it would be appropriate
for winding up proceedings take place or whether the complainant should be limited to some
lesser remedy. If the relief sought is of a kind which may affect other members who are not
parties to the arbitration, there is no reason in principle why their views should not be canvassed
by the arbitrators before deciding whether to make an award in those terms. 43

A certified copy of the order of Tribunal has to be filed with the Registrar within 30 days. The
Tribunal can pass interim orders. Orders for alteration of memorandum or articles cannot be
overruled by the company by making its own inconsistent changes. Such a thing as that can be
done with leave of the Tribunal. Alterations ordered by the Tribunal have the same effect as if
they have been made by the company itself. A certified copy of such alterations has to be filed
with the Registrar.

CLASS ACTION [S. 245]

The number of members or depositors who can apply to the Tribunal under the right of class
action is given in sub-section (3) of this section. The grounds of action are specified in sub-
section (1). If they are of opinion that the management or conduct of affairs of the company
are being carried on in a manner prejudicial to the interests of the company or its members or
depositors, they can file an application before the Tribunal on behalf of all of them for any of
the following orders: (a) to restrain the company from committing an act which is ultra vires
the articles or memorandum; (b) to restrain the company from committing breach of any
provision of the company's memorandum or articles; (c) to declare a resolution altering the
memorandum or articles as void if the resolution was passed in suppression of material facts

43
Fulham Football Club (1987) Ltd v Richards, 2012 Ch 333.
or obtained by misstatement to members or depositors (d) to restrain the company and its
directors from acting on such resolution; (e) to restrain the company from doing an act which
is contrary to the provisions of the Act or any other law for the time being in force; (f) to
restrain the company: from taking action contrary to any resolution passed by the members;
(g) to claim damages or compensation or demand any other suitable action from or against (i)
the company or its directors for any fraudulent, unlawful or wrongful act or omission or
conduct or any likely act or omission or conduct on its or their part; (ii) the auditor including
auditing firm of the company for any improper or misleading statement of particulars made in
his audit report or for any fraudulent, unlawful or wrongful act or conduct, or (iii) any expert
or advisor or consultant or any other person for any incorrect or misleading statement made to
the company or for any fraudulent or unlawful or wrongful act or conduct or any likely act or
conduct on his part; (h) to seek any other remedy as the Tribunal may deem fit.

Where an audit firm is sought to be made liable, the firm as well as every partner involved in
the wrongful act would be liable. [S. 245(2)]

Who can apply [S. 245(3)].-The requisite number of members for an application is as follows:
(a) in the case of a company having a share capital, not less than 100 members or not less than
such percentage of the total number of members as may be prescribed, whichever is less, or
any member or members holding not less than such percentage of the issued share capital as
may be prescribed. It is necessary that the applicants should have paid their calls and other dues
to the company; (b) in the case of a company not having share capital, not less than one-fifth
of the total number of its members. The requisite number of depositors is not to be less than
100 depositors or not less than such percentage of the total number of depositors as may be
prescribed, whichever is less, or any depositor/depositors to whom the company owes such
percentage of the total deposits of the company as may be prescribed.

Factors to be considered by Tribunal [S. 245(4)].-In considering the application for relief
under the section, the Tribunal has to take into account the following factors in particular: (a)
whether the member or depositor is acting in good faith in making the application; (b) any
evidence before it as to the involvement of any person other than directors or officers of the
company on any of the matters provided in Section 245(1) clauses (a) to (f); (c) whether the
cause of action is one which the member or depositor could pursue in his own right rather than
through an order under the section; (d) any evidence before the Tribunal as to views of the
members or depositors of the company who have no personal interest, direct or indirect, in the
matter before the Tribunal; (e) where the cause of action is an act or omission that is yet to
occur and whether it could have been authorised by the company before it occurs or ratified by
the company after its occurence; (f) where the cause of action is an act or omission that has
already occured and whether it could be or likely to be ratified by the company. [S. 245(4)]

After an application has been admitted the Tribunal is to have regard of the following: (a) a
public notice should be given on the admission of the application to all the members or
depositors of the class in such manner as may be prescribed; (b) all similar applications
prevalent in any jurisdiction should be consolidated into a single application. The class
members or depositors should be allowed to choose the lead applicant. If they cannot come to
a consensus, the Tribunal gets the power to appoint a lead applicant who should be incharge of
the proceedings from the applicant's side; (c) two class action applications for the same cause
are not to be allowed; (d) the costs or expenses connected with the application for class action
are to be defrayed by the company or any other person responsible for the oppressive act.

An order passed by the Tribunal has binding effect upon the company and on all members,
depositors, and auditor, including audit firm or expert or consultant or advisor or any other
person associated with the company. Where the application is found to be frivolous or
vexatious, it has to be rejected for reasons to be recorded in writing. The applicant can be
required to pay costs to the opposite party not exceeding Rs 1,00,000 as may be specified in
the order.

Any person or group of persons representing the affected persons may be allowed to file an
application under the section subject to compliance with the requirements of the section.

The section is not to apply to a banking company.

Penal clause [S. 245(7)]. —Any company which fails to comply with an order passed by the
Tribunal under the section is punishable with fine of not less than Rs 5,00,000 but may extend
to Rs 25,00,000. Every defaulting officer is punishable with imprisonment extending to three
years and fine of not less than Rs 25,000 extending up to Rs 1,00,000.
The provisions of Sections 337 to 341 are to apply mutatis mutandis to an application made to
the Tribunal under Section 241 or 245. [S. 246]
BIBLIOGRAPHY
Relevant Acts
• The Companies Act, 1956. (Act No. 1 of 1956). [Online] Available at:
https://www.mca.gov.in/Ministry/pdf/Companies_Act_1956_13jun2011.pdf

• The Companies Act, 2013. (Act No. 18 of 2013). [Online] Available at:
https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf

Books Referred: -
• Avtar Singh, Company Law, 17th Edition, Eastern Book Company, Lucknow,
2022
• Avtar Singh, Introduction to Company Law, 12th Edition, Eastern Book
Company, Lucknow, 2019

Relevant Articles
• Sulalit A., 2014. Companies Act, 2013: Rise of the Minority Shareholders. India Law
Journal.