Unpacking the Scope Of Oppression, Prejudice And Mismanagement Under Company Law In India
27 Pages Posted: 28 Jul 2020
Date Written: July 24, 2020
The goal of this paper is to unpack the shareholder remedies of oppression, prejudice and mismanagement under sections 241 and 242 of the Companies Act, 2013 Act (the “2013 Act”). While this legislation substantially tracks its predecessor in the form of sections 397 and 398 of the Companies Act, 1956 (the “1956 Act”), it has also deviated, and that too in material fashion, on some counts. The 2013 Act has the effect of both expanding as well as contracting the shareholder remedies. The upshot of this paper is that section 241 of the 2013 Act considerably expands the scope of the remedy, thereby ensnaring within it conduct that was previously excluded. By introducing the concept of “prejudice” caused to a member as objectionable conduct apart from “oppressive” behaviour, Parliament has arguably lowered the standard of conduct that a petitioning shareholder must satisfy before it can revoke the remedy. However, by remaining steadfast in its insistence that petitioners must satisfy the requirement that there must exist grounds for “just and equitable” winding up of a company, no matter what the nature of the conduct of the offending shareholders, section 242 of the 2013 Act retains a considerable burden on petitioning shareholders. The 2013 Act, therefore, offers a mixed bag.
Keywords: Oppression, prejudice, mismanagement, just and equitable winding up, company law, India
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