Oppression and Management


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Meaning of Oppression and Management, Who can Apply, Who cannot apply, Foss and Harbottle Case

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Oppression and Management

  1. 2. <ul><li>According to the Dictionary meaning of word, is any act exercised in a manner burdensome, harsh & wrongful. </li></ul><ul><li>The term ‘oppression’ has been explained by Lord Cooper as, “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 fair 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.” </li></ul>
  2. 3. Co. A Director Purchase the asset of the co. By taking loan from the co. for the same 20% not Supported 80% Supported The Directors
  3. 4. <ul><li>When the affairs of the company are being conducted in a manner prejudicial to the public interest or the company's interest. </li></ul><ul><li>OR </li></ul><ul><li>When by a reason of material change in the management or control of he company the affairs of the company are likely to be conducted in a manner prejudicial to the public interest or the company's interest. </li></ul>
  4. 5. Estate Tea & Plantation Co. Sold by Director at low price W/O Approval by shareholder under Sec. 293(1) & W/O giving adequate Notice (under sec. 173) & other Info. Tea Plantation Co. Malayalam Plantation (India) Ltd.
  5. 6. <ul><li>A member who must sign application given in sec 397 & 398. </li></ul><ul><li>With share capital:- at least 100 members or one tenth members. </li></ul><ul><li>Without share capital:- one fifth of the total no of members. </li></ul>
  6. 7. <ul><li>A member whose calls or other sums due on their shares have not been paid. </li></ul><ul><li>A holder of a letter of allotment of a partly paid share. </li></ul><ul><li>A holder of a share warrant. </li></ul><ul><li>A transferee of shares who has not lodged the shares for transfer to the company </li></ul>
  7. 8. <ul><li>Existence of alternative relief </li></ul><ul><li>Oppression of majority </li></ul><ul><li>Oppression qua members </li></ul>
  8. 9. <ul><li>Not calling a gen. meeting & keeping the shareholder in dark </li></ul><ul><li>Non maintenance of statutory records & not conducting affairs of the co. in accordance with the Co’s Act </li></ul><ul><li>Depriving a member of the right to dividend </li></ul>
  9. 10. <ul><li>Transfer of share held by Company to some shareholders otherwise than by making an offer to all </li></ul><ul><li>If sale of asset is made by a Co. to some of its directors & simultaneously giving them loan to purchase the same </li></ul><ul><li>Issue of further shares benefiting a section of the share holders </li></ul>
  10. 11. <ul><li>An unwise, inefficient careless conduct of a director </li></ul><ul><li>Not declaring dividend when Co. is making loss </li></ul><ul><li>Non-holding of the meeting of the director </li></ul><ul><li>Failure to maintain proper records of the Co. </li></ul>
  11. 12. <ul><li>Sec. 398 provides for relief in case of mismanagement by majority </li></ul><ul><li>A requisite no of members of the Co. may apply to NCLT for appropriate relief on the ground of mismanagement of the Co. </li></ul>
  12. 13. <ul><li>(Under Sec. 398) </li></ul><ul><li>Serious in fight between the directors </li></ul><ul><li>Illegal constitution of the board of directors </li></ul><ul><li>Gross neglect of interest of the Co. by sale of its only assets </li></ul>
  13. 14. <ul><li>Diversion of the fund to benefit the majority </li></ul><ul><li>Operation of bank A/C by an unauthorized person </li></ul><ul><li>Advance of loans with out execution of a document </li></ul><ul><li>Continuation of managing director in office after the expiry of his term. </li></ul>
  14. 15. <ul><li>Sale of assets at low price & with out compliance with the Act </li></ul><ul><li>Violation of statutory provisions & those of articles </li></ul><ul><li>Violation of the condition of the Co’s memorandum </li></ul>
  15. 16. <ul><li>Building up of reserves </li></ul><ul><li>Merely because company incurs loss, it can not be that it is mismanaged </li></ul><ul><li>Removal of secretary by majority decision of the board of directors unless it is shown that the removal has prejudicially affected the interest of the Co. or the public interest </li></ul>
  16. 17. <ul><li>Removal of the Director & termination of the works manager’s service </li></ul><ul><li>Arrangement with creditors in Co.’ bona fide interest </li></ul>
  17. 21. <ul><li>It is a case of Victoria Park Company </li></ul><ul><li>Richard Foss and Edward Starkie Turton were two minority shareholders </li></ul><ul><li>Claimant alleged that property of the company had been misapplies, wasted and various mortgages were given. </li></ul>Copyright © 2001 by Harcourt, Inc. All rights reserved. 16-
  18. 22. <ul><li>Proper plaintiff rule </li></ul><ul><li>Majority rule principle </li></ul><ul><li>Company is a separate entity </li></ul>
  19. 23. <ul><ul><li>ULTRA VIRES AND ILLEGALITY </li></ul></ul><ul><ul><ul><li>An act which is ultra vires the company or illegal </li></ul></ul></ul><ul><ul><li>ACTIONS REQUIRING A SPECIAL MAJORITY </li></ul></ul><ul><ul><li>INVASION OF INDIVIDUAL RIGHTS </li></ul></ul><ul><ul><ul><li>Company member's right to vote may not be interfered </li></ul></ul></ul><ul><ul><ul><li>Any interference leads to a personal right of a member to sue in his own name to enforce his right </li></ul></ul></ul><ul><ul><ul><li>Lord Jessel MR </li></ul></ul></ul><ul><ul><ul><li>FRAUDS ON THE MINORITY </li></ul></ul></ul><ul><ul><ul><ul><li>An exception to the rule in Foss Vs Harbottle </li></ul></ul></ul></ul>
  20. 24. when there are serious disputes, one group approaches the CLB u/s 397/398 alleging oppression and mismanagement. Notice to be given to Central Government of applications under sections 397 and 398 The Company Law Board can pass any orders under section 397/398 and section 402 of Companies Act, 1956 based on facts and circumstances of the case with the intention of regulating the affairs of the Company and putting an end to the matters complained of finally.
  21. 25. Effect of alteration of memorandum or articles of company by order under section 397 or 398. Addition of respondents to application under section 397 or 398 Powers of Government to prevent oppression or mismanagement. Earlier, there used to be much emphasis on technical issues under section 397/398 of the Companies Act, 1956 rather the object of the provision now a days its objective
  22. 27. <ul><li>THANK YOU </li></ul>
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