Companies Act Section 241 — Application to Tribunal for relief in cases of oppression, etc
CHAPTER XVI PREVENTION OF OPPRESSION AND MISMANAGEMENT
Commercial / Corporate
Summary
Sub-section (1) lets a member of a company complain to the Tribunal if the company's affairs are being run in a way that harms the public interest, or that is prejudicial or oppressive to that member or to other members, or that harms the company's own interests. It also covers a situation where a material change has happened in the company's management or control—such as a change in the Board of Directors, the manager, or the ownership of shares (or membership, if the company has no share capital)—and that change was not made by or for the benefit of creditors, including debenture holders, or any class of shareholders. If that change makes it likely the company's affairs will be run in a way that harms the company or its members, the member can apply to the Tribunal for an order, but only if that member has the right to apply under section 244.
Sub-section (2) allows the Central Government to apply to the Tribunal on its own if it believes the company's affairs are being conducted in a manner prejudicial to public interest. There is a proviso that applications under this sub-section, for such companies or classes of companies as may be prescribed, must be made before the Principal Bench of the Tribunal, and that Bench will handle them.
Sub-section (3) lets the Central Government refer a case to the Tribunal if it sees circumstances suggesting that a person involved in running a company is guilty of fraud, misfeasance, persistent negligence, or default in carrying out their legal duties, or of breach of trust. It also covers situations where that person has not run the business according to sound business principles or prudent commercial practices, or where the company has been managed in a way that is likely to cause or has caused serious injury or damage to the trade, industry, or business the company belongs to. Additionally, it covers management with intent to default on creditors, members, or others, or for a fraudulent or unlawful purpose, or in a manner prejudicial to public interest. In such cases, the Central Government may initiate a case against that person and refer it to the Tribunal, asking the Tribunal to inquire and decide whether that person is fit and proper to hold the office of director or any other office connected with managing any company.
Sub-section (4) states that the person against whom a case is referred to the Tribunal under sub-section (3) must be joined as a respondent to the application.
Sub-section (5) sets out the requirements for an application made under sub-section (3). It must contain a concise statement of the circumstances and materials that the Central Government considers necessary for the inquiry, and it must be signed and verified in the manner laid down in the Code of Civil Procedure for signing and verifying a plaint in a suit by the Central Government.
Official Text
(1) Any member of a company who complains that—
(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or
(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company’s shares, or 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 its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter.
(2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter. 1[Provided that the applicants under this sub-section, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.] 1[
(3) Where in the opinion of the Central Government there exist circumstances suggesting that—
(a) any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or of breach of trust;
(b) the business of a company is not or has not been conducted and managed by such person in accordance with sound business principle or prudent commercial practices;
(c) a company is or has been conducted and managed by such person in a manner which likely to cause, or has caused, serious injury or damage to the interest of the trade, industry or business to which such company pertains; or
(d) the business of a company is or has been conducted and managed by such person with intent to default its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest, the Central Government may intiate a case against such person and refer the same to the Tribunal with a request that the Tribunal may inquire into the case and record a decision as to whether or not such person is a fit and proper person to hold the officer of director or any other office connected with the conduct and management of any company.
(4) The person against whom a case is referred to the Tribunal under sub-section (3), shall be jointed as a respondent to the application.
(5) Every application under sub-section (3)—
(a) shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purpose of the inquiry; and
(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure (5 of 1908), for the signature and verification of a plaint in a suit by the Central Government.]