Sections 241-246 of the Act lay down the legal framework to safeguard the rights of minority shareholders and prevent instances of mismanagement within companies.
In this article, we delve into the provisions of oppression and mismanagement under the Companies Act, 2013, and examine significant judicial precedents that have shaped the interpretation and application of these provisions.
Understanding the vagaries
Oppression and mismanagement are grave concerns that can adversely affect the interests of stakeholders, particularly minority shareholders, creditors, and employees. Oppression refers to any act that unfairly prejudices the interests of shareholders or amounts to tyranny by the majority shareholders. Mismanagement, on the other hand, encompasses actions or decisions by the company's management that are detrimental to its interests or those of its stakeholders. It is pertinent to the note that the terms “oppression” and “mismanagement” operate in different spheres and thus the particulars to be pleaded would vary depending on the circumstance.
Provisions under the Act
Sections 241-246 of the Companies Act, 2013, delineate the provisions pertaining to oppression and mismanagement. In order to maintain an application, the following conditions would need to be satisfied in the complaint filed by a member of a company:
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