Thursday, June 20, 2013

Minority Rights on Oppression and Mismanagement Under Companies Act, 1956 And Companies Bill, 2011

Minority Rights on Oppression and Mismanagement Under Companies Act, 1956 And Companies Bill, 2011
The term of Oppression under Companies Act, 1956:
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.

The term oppression explained in the case Scottish case of Elder v/s. Elder & Watson Ltd. which was cited in the case of Shanti Prasad Jain v/s. Kalinga Tubes by the Supreme Court-

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 their 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.

The most important element of oppression is that it should be a continuous act, which means that the act must be continued by the majority shareholder till date the petition is filed with the Tribunal.

Section 397 of the Companies Act, 1956 says that when any affair of the company is being conducted to any member or members by the way of prejudice to public interest or oppressive then any one or more than one member have right to apply to the Tribunal by the virtue of Section 399 of the Companies Act, 1956.

The requisite number of members who must sign the application is given under Section 399 of the Companies Act, 1956.
1. In case of a company, having a share capital an application signed by at least one hundred members or by at least 1/10th of the total number of its members, whichever is less
OR
A valid application may be made by any member/ members holding not less than 1/10th of the issued share capital of the company

2. In case of a company, having not a share capital an application signed by at least 1/5th of the total number of members of the company.

If the calculation of requisite members as per (1) mentioned above, joint holders of the shares shall be counted as one member only.
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