Being member of company as on date of filling of petition is mandatory to invoke remedy of oppression mis-management

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[1] 

Shubham Budhiraja[2]




(i)             When there is a violation, of ‘SEBI Regulations’, a ‘Member’ of a ‘Company’ cannot ask for, ‘Rectification of Register’, although, the ‘Company’, itself, can apply for such ‘Rectification.

 

(ii)           Under the ‘Companies Act, 2013’, a Member of a Company, is not one of them, competent, to prefer an ‘Application’, for ‘Rectification’. (i) ‘Any Depositary’, (ii) ‘The Company’, (iii) ‘The Depositary Participant’, (iv) ‘The Holder of Securities’ and / or the ‘Securities and Exchange Board of India’, can seek for ‘Rectification’ of ‘Register’.

 

(iii)          In granting the Application for ‘Rectification’, it is necessary, to determine other issues concerning ‘complicated’, ‘questions of Law and Fact’, and ‘disputed questions of title’, right etc. then the ‘Company Court’ / ‘Tribunal’ may direct the parties to get their disputes, decided by the ‘Competent Civil Court’, in a Trial, in appropriate proceedings as the case may be.

 

(iv)         It is pointed out by this Tribunal, that under Section 241 of the Companies Act, 2013, a remedy, is available to a ‘minority shareholder’ against an act of ‘oppression’, by the majority, shareholders, by their continuous acts. It has no application for redressal of ‘grievances’ and ‘wrong acts’ of management of the Company, as per decision Suresh Kumar Sanghi v. Supreme Motors Ltd., 1983, 54 Comp.cas 235 (Del).

 

(v)           A shareholder, who claims relief under Section 397, 398 of the Companies Act, 1956 (now Section 41, 242 under the Companies Act, 2013) must satisfy the Court / Tribunal, that he is a ‘shareholder’ of a company, by means of allotment of Shares, in his favour, which is evidenced not only by the Register of Members, but also, by the ‘Statutory Returns’ and ‘Documents’, maintained by the Company.

 

(vi)         The ‘onus’, to establish ‘Membership’ is on the Petitioner, and it is up to him to prove, that he is a member, of a Company, ‘on the day’ of filing of petition. When he is not a Member of Company, he cannot allege ‘Oppression’, to invoke, Section 241 of the Companies Act, 2013, against the Company, as opined, by this ‘Tribunal’.

 

(vii)       There is ‘no straight jacket cast iron formula’, specified, to define the ‘term’, ‘oppression’ and ‘mismanagement’. A ‘single act’ may not be enough for the grant of relief of ‘oppression’, and ‘continuous course, of oppressive code of conduct’, on the part of the ‘Majority Shareholder’, is very much necessary.

 

(viii)     The ingredients of Section 242 of the Companies Act, 2013 has ‘no application’, whatsoever, for redressal of ‘grievances of wrong acts’, of the management of a company.

 

(ix)         A mere, ‘illegal’ or invalid act would not be termed as acts of ‘oppression’.

 

(x)           It is relevantly pointed out by this Tribunal, that the term, ‘shareholder’, for the purpose of Section 241 of the Companies Act, 2013, is to be understood in widest import, to ‘include persons’, ‘whose names’, are not ‘borne’, on the Register of Members, but who have an ‘indefensible’ right, to ‘shares’, as per decision in Shree Balaji Textile Mills (P) Ltd. v. Ashok Kaule reported in (1989) 66 Comp. cas. 654 (Kar

 

 

 


[1] Jitendra Virmani v. MRO- Tek Reality Limited, NCLAT Chennai, Company Appeal (AT) No.363/2019

[2] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com , +91-9654055315

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