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Date:20^th February 2010	Compiled by: M Sathya Kumar
= Oppression and Mismanagement= Application to the Company Law Board for relief in cases of oppression Any members of a company = who complain that the affairs of the company are being conducted in a manner prejudical to public interest or in a manner oppressive to any member or members may apply to the Company Law Board for an order for relief, provi= ded such members have a right so to apply as given below. If, on any application, t= he Company Law Board is of the opinion :-= that the company's affairs are being conducted in a ma= nner oppressive to any member or members; and that to wind up the company would unfairly prejudice s= uch member or members and would be a very serious step, but that otherwi= se the facts would justify the making of a winding-up order on the grou= nd that it was just and equitable that the company should be would up; = the Company Law Board may, with a view to bringing to an end= the matters complained of, make such order as it thinks fit. Application to Court for relief in c= ases of mismanagement= Any members of a company who complain :- that the affairs of the company are being conducted in= a manner prejudicial to public interest or in a manner prejudicial to = the interests of the company; or that a material change has taken place in the manageme= nt or control of the company, whether by an alteration in its Board of directors, or manager or in the ownership of the company's shares, o= r if it has no share capital, in its membership, 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 public interest or in a manner prejudicial to the interests of the company; may apply to the Company Law Board for an order of relief provided such members have a right so to apply as given below. If, on any such application, the Company Law Board is of opi= nion that the affairs of the company are being conducted as aforesaid or that = by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conduct= ed as aforesaid, the court may, with a view to bringing to an end or prevent= ing the matters complained of or apprehended, make such order as it thinks fi= t. Right to apply The following members of a company shall have the right to a= pply as above:- in the case of a company having a share capital, not l= ess than one hundred members of the company or not less than one tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital = of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; in the case of a company not having a share capital, n= ot less than one-fifth of the total number of its members. <= /span> Where any share or shares are held by two or more persons jointly, they shall be counted only as one number. Where any members of a company, are entitled to make an application, any one or more of them having obtained the consent in writi= ng of the rest, may make the application on behalf and for the benefit of al= l of them. The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the Company Law Board, notwithstanding that the above requirements for application are not fulfilled. The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the paymen= t of any costs which the Court dealing with the application may order such mem= ber or members to pay to any other person or persons who are parties to the application. If the managing director or any other director, or the manag= er, of a company or any other person, who has not been impleaded as a respond= ent to any application applies to be added as a respondent thereto, the Compa= ny Law Board may, if it is satisfied that there is sufficient cause for doing so, direct that he may be added as a respondent accordingly. Notice to be given to Central Govern= ment of application The Company Law Board must give notice of every application = made to it as above to the Central government, and shall take into considerati= on the representations, if any, made to it by that Government before passing= a final order. Right of Central Government to apply= The Central Government may itself apply to the Company law B= oard for an order, or cause an application to be made to the Company Law Board= for such an order by any person authorised be it in this behalf. Powers of Company Law Board on application Without prejudice to the generality of the powers of the Com= pany Law Board, any under either section may provide for :- the regulation of the conduct of the company's affairs= in future; the purchase of the shares or interests of any members= of the company by other members thereof or by the company; <= /span> in the case of a purchase of its shares by the company= as aforesaid, the consequent reduction of its share capital; the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other namely:- <= /span> the managing director, any other director, the manager, upon such terms and conditions as may, in the opinion of the Company Law Board, be just and equitable in all the circumstances of the case; the termination, setting aside or modification of any agreement between the company and any person not referred to in clau= se (d), provided that no such agreement shall be terminated, set aside = or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtain= ing the consent of the party concerned; the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by= or against the company within three months before the date of the application, which would, if made or done by or against an individua= l, be deemed in his insolvency to be a fraudulent preference; any other matter for which in the opinion of the Compa= ny Law Board it is just and equitable that provision should be made. Interim order by the Company Law Boa= rd Pending the making by it of a final order, the Company Law B= oard may, on the application of any party to the proceedings, make any interim order which it thinks fit for regulating the conduct of the company's affairs, upon such terms and conditions as appear to it to be just and eq= uitable. Effect of alteration of memorandum or articles of company by order Where an order makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this = Act, the company shall not have power, except to the extent, if any permitted = in the order, to make without the leave of the Company Law Board, any altera= tion whatsoever which is inconsistent with the order, either in the memorandum= or in the articles. The alterations made by the order shall, in all respects, ha= ve the same effect as if they had been duly made by the company in accordance with the provisions of this Act.<= /o:p> A certified copy of every order altering or giving leave to alter, a company's memorandum or articles, must within thirty days after = the making thereof, be filed by the company with the Registrar who shall registrar the same.<= /p> If default is made in complying with the above provisions, t= he company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. Consequences of termination or modification of certain agreements Where an order terminates, sets aside or modifies an agreeme= nt :- the order shall not give rise to any claim whatever against the company by any person for damages or for compensation for loss of office or in any respect, either in pursuance of the agreeme= nt or otherwise; no managing or other director or manager whose agreeme= nt is so terminated or set aside, shall for a period of five years from= the date of the order terminating the agreement, without the leave of the Company Law Board, be appointed, or act, as the managing or other director or manager of the company. Any person who knowingly acts as a managing or other directo= r or manager of a company in contravention of the above provision, every direc= tor of the company, who is knowingly a party to such contravention shall be punishable with imprisonment for a term which may extend to one year, or = with fine which may extend to five thousand rupees, or with both. The Company Law Board will not grant leave for appointment as managing director or director or manager of the company unless notice of = the intention to apply for leave has been served on the Central Government and that Government has been given an opportunity of being heard in the matte= r. Powers of Central Government to prev= ent oppression or mismanagement= The Central Government may appoint such number of persons as= the Company Law Board may, by order in writing, specify as being necessary to effectively safeguard the interests of the Company or its shareholders or public interests, to act as directors thereof for such period not exceedi= ng 3 years on any one occasion as it deems fit if the Company Law Board :- on a reference being made to it by the Central Governm= ent ; or on an application of not less than one hundred members= of the company or of members of the company holding not less than one-t= enth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, th= at it is necessary to make the appointment or appointments in order to preve= nt the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudic= ial to the interests of the company or to public interest. However, in lieu of passing order as aforesaid, the Company = Law Board may, if the company has not availed itself of the option given to i= t of proportional representation to minority shareholders on the Board of the company, direct the company to amend its articles in the manner provided section 265 and make fresh appointments of directors in pursuance of the articles as so amended within such time as may be specified in that behal= f by the Company Law Board. In case the Central Government passes such an order it may, = if thinks fit, direct that until new directors are appointed in pursuance of= the order aforesaid, not more than two members of the company specified by the Company law Board shall hold office as additional directors of the compan= y. The Central Government shall appoint such additional directors on such directions. The person appointed as a director by the Central Government= in accordance with the above provisions, need not hold any qualification sha= res nor need to retire by rotation. However, his office as director may be terminated at any time by the Central Government and another person appoi= nted in his place. No change in the constitution of the Board of Directors can = take place after an additional director is appointed by the Central Government= in accordance with these provisions unless approved by the Company Law Board= . The Central Government in such cases may also issue such directions to the company as it may consider necessary or appropriate in regard to its affairs. Power of the Company Law Board to prevent change in Board of directors likely to affect company prejudicial= ly Where a complaint is made to the Company Law Board by the managing director or any other director or the manager of a company that,= as a result of a change which has taken place or is likely to take place in ownership or any shares held in the company, a change in the Board of directors is likely to take place which (if allowed) would affect prejudicially the affairs of the company, the Company Law Board may, if satisfied, after such inquiry as it thinks fit to make that it is just and proper to do so, by order direct that no resolution passed or that may be passed or no action taken or may be taken to effect a change in the Board= of directors after the date of the complaint shall have effect unless confir= med by the Company Law Board. Any such order shall have effect notwithstanding anything to= the contrary contained in any other provision of this Act or in the memorandu= m or articles of the company, or in any agreement with, or any resolution pass= ed in general meeting by, or by the Board of directors or, the company. The Company Law Board shall have power when any such complai= nt is received by it, to make an interim order to the effect set out above, = before making or completing the inquiry aforesaid. Nothing contained above shall apply to a private company, un= less it is a subsidiary of a public company= Article by Mr. Murthy , a Company law Expert


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