Class Action Suits – Sec 245 of The

Companies Act,2013
 Meaning

In a class action suit, a large group of people, having same or similar injuries caused by the same person, collectively
bring a claim to court, represented by one or more persons. This form of lawsuit is also called a representative action. One
set of persons representing a larger group approach the court for redressal of their grievances.
What’s the rationale behind it?

• To protect the interest of members of a class who are geographically dispersed.

• To reduce the duplication of the litigation as it combines the various proceedings initiated in different
parts/jurisdiction bearing same cause of action(s).
• Further it also makes adjudication possible; otherwise as per the rule of necessary party all the
members of a class are required to be made plaintiff, which otherwise would have made the
adjudication impossible.
NUMBERS OF MEMBERS WHO CAN MAINTAIN A CLASS ACTION SUITS
► National Company Law Tribunal (Second Amendment) Rules, 2019 specified the following thresholds under Rule
84(3) of the NCLT Rules, 2016.
► Number of member : - In case of a company having a share capital,
the requisite number of member or members to file an application under sub-section (1) of section 245
shall be at least 5% of the total number of members of the company; or 100 members of the company,
whichever is less; or
► Value – member or members holding not less than 5% of the issued share capital of the company, in case of an
unlisted company;
► member or members holding not less than 2% of the issued share capital of the company, in case of a listed
company.
Class Action Suit by depositors
► For Class Action suit by Depositors
► For Class Action suit by Depositors National Company Law Tribunal (Second
Amendment) Rules, 2019 specified the following thresholds under Rule 84(4) of the
NCLT Rules, 2016.
► The requisite number of depositor or depositors to file an application under sub-
section (1) of section 245 shall be
► (i) (a) at least 5% of the total number of depositors of the company; or (b) 100
depositors of the company, whichever is less; or Law Corner
► (ii) depositor or depositors to whom the company owes 5% of total deposits of the
company.
Unique feature of Class Action Suits : -

.
► Various persons/ entities against whom such actions can be taken are:
• A company or its directors for any fraudulent, unlawful or wrongful act or omission.
• An auditor including audit firm of a company for any improper or misleading
statement of particulars made in the audit report or for any unlawful or fraudulent
conduct.
• An expert or advisor or consultant for an incorrect or misleading statement made to
the company.
ORDERS THAT MAY BE SOUGHT FROM THE NATIONAL COMPANY LAW TRIBUNAL

1. to restrain the company from committing an act which is ultra vires the articles or
memorandum of the company;
2. to restrain the company from committing breach of any provision of the company’s
memorandum or articles;
3. to declare a resolution altering the memorandum or articles of the company as void,
if the resolution was passed by suppression of material facts or obtained by mis-
statement to the 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 this
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;
(h) to seek any other remedy as the Tribunal may deem fit.
► ORDER SHALL BE BINDING
► Section 245(6) provides that any order passed by the Tribunal shall be binding on
the company and all its members, depositors and auditor including audit firm or
expert or consultant or advisor or any other person associated with the company.
► PUNISHMENT FOR NON-COMPLIANCE
► Any company which fails to comply with an order passed by the Tribunal shall be
punishable with fine which shall not be less than Rs. 5 lakh but which may extend to
Rs. 25 lakh rupees and every officer of the company who is in default shall be
punishable with imprisonment for a term which may extend to 3 years and with fine
which shall not be less than Rs. 25,000 but which may extend to Rs. 1 lakh.
Difference between section 241 and 245