397 398 companies act 1956 pdf

Sec 398 of chapter vi of the companies act, 1956 deals with the provision of prevention of mismanagement. Oppression and mismanagement allotment of shares declaration, cancellation and mandatory injunction against the requisition under section 169 of the companies act allotmenttransfer of shares sections 397 398 of the act voting rights sections 286, 300 and 108 of the companies act financial mismanagement or not held that. Companies court rules, 1959 in exercise of the powers conferred by subsections 1 and 2 of section 643 of the companies act, 1956, and of all other powers enabling, the supreme court of india, after consulting the high courts, hereby makes the following rules. Section 397398 of the companies act, 1956 provides a relief to the minority against the majority if the majority indulges in the oppressive acts and the acts of. Directors responsibility, removal, disputes and remedies. Is relief under section 397398 of companies act, 1956. National company law appellate tribunal, new delhi company. I am of the strong opinion that than any provision of law under the companies act, 1956, the provisions dealing with oppression and. Pdf on feb 29, 2020, amit kumar and others published scope of sections 397 and 398 of companies act 1956. Relationship between corporate social responsibility and corporate governance dr. Sec 397 and 398 of the companies act, 1956 give wide powers to the clb to make any order with a view to bringing to an end the matters complained of or to prevent the matter complained of or apprehended. Application to company law board for relief in cases of oppression. Aggrieved by this and some other acts on the part of the garg group, gupta group filed cp. Books of account companies act, 1956 allegations of mismanagement and connected issues.

Initially, the members are supposed to establish a strict case against the. Section 402 of the act confers powers on the company law boardtribunal to grant various reliefs where a petition for oppression and. Act, 20 which corresponds to section 397 and 398 of the earlier companies act, 1956. Addition of respondents to application under section 397 or 398. A lengthy commentary can be written on section 397 398 of the companies act, 1956 itself.

Company petition under section 397, 398 and 1114 of the companies act, 1956 seeking reliefs against the acts of oppression and mismanagement practised by the respondents by various acts of fraud and fabrication of documents in an effort to remove the appellant from the membership and. The company law board as well as the high court have found that the provision of notice under section 286 of the companies act was not complied with. Relationship between corporate social responsibility and. Sections 210, 397, 398, 399, 402, 406 and 407 of the. From the above it can be inferred that there is no express provision under the company act, 1956, which bars the jurisdiction of civil court over the company matters. The provisions of law of limitation will have no application to a petition under section 397 398 of companies act, 1956. As the shareholders of a company can not meet so often to take decisions on daytoday functions of the company, directors are elected by the shareholders in accordance with the provisions of the companies act, 1956. Usually the issue of removal of a director is agitated in the high court or the company law board under section 397 398 of the companies act, 1956. Companies act, 1956 bare acts law library advocatekhoj. Notice to be given to central government of applications under sections 397 and 398. Directors responsibility, removal, disputes and remedies under section 397 398 of companies act, 1956. Research paper on corporate frauds in the world of corporate sector. Sections 397 398 of the companies act, 1956 deals with very important issue touching the corporate world. O oppression and mismanagement section 397 and 398.

I do strongly feel that an effective enforcement of provisions like 397 398 of the act and the protection of rights of all shareholders without any scope for misuse or abuse is very very important for the growth of industry or the corporate world. There are different views as to how section 397398 of companies act, 1956 is to be interpreted when it comes providing a remedy to the minority shareholders. It is very clear from several judgments that whenever a civil dispute arises, even if under company law, the. It will never be an easy task to understand a company dispute and pass orders and naturally there will be delay in getting the required orders under section 397 398 of the companies act, 1956. Jul 12, 2014 select the section of the companies act, 1956 or of companies act, 20 under which the order has been passed. How to construe minority for the purpose of section 397 398 is dealtwith under section 399 which prescribes qualification to approach the company law board under section 397 398. Krishnan and five others, who filed company petition no. The companies act, 1956 the companies act, 1956 is applicable to all type of companies, both listed and unlisted companies. Any members of a company who complain that the affairs of the company 2 are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members including any one or more of themselves may.

Raghunath swarup mathur and his four sons are the petitioners before this court under sections 397 and 398 of the companies act, 1956 hereinafter referred to as the act. If this is allowed, then, many companies may not function. The company law board, at present, is empowered to entertain applications under section 397 398 of the act from the shareholders who qualify under section 399 of the act and to pass appropriate orders keeping in view of the scheme of the chapter. However there are exceptions to this rule prevention of oppression and mismanagement being one such ground.

On 2nd may, 2017, the counsel failed to appear before the tribunal due to which the petition was dismissed for default on the said. Sec 397 and sec 398 of companies act corporate law forum. Dealing with the issue of public interest under section 397 398 of the companies act, 1956 and the requirement on the part of the company law board to look into many issues while entertaining a petition under section 397 398 of the companies act, 1956, the honble high court of. Application to clt for relief in cases of oppression. Any members of a company who complainthat the affairs of the company 3 are being conducted in a manner prejudicial to public interest or in a. A curious case of public interest in indian corporate law. Name capital letters designation representation signature upload brief to use the new ai search cites. Therefore, the disputes in a petition properly brought under sections 397 and 398 read with section 402 are not capable of being. Short title, commencement and extent 1 this act may be called the companies act, 1956. Section 397 of the companies act, 1956 says that when any affair of the company is. Oppression and mismanagement under the companies act. The act contains elaborate provisions about the functioning of companies and appointment, role, position, responsibilities and liabilities of board of directors as well as protection of interest of investors in cases of. Section 398 of companies act, 20 corporate law reporter.

Sec 241 of chapter xvi of the companies act, 20 deals with the prevention of mismanagement. Section 397 and 398 of the companies act, 1956 deals with oppression and mismanagement by the majority in a company against the minority shareholders. The corporate world has adopted this majority rule in decision making process and management of the companies. Admissibility of certain documents as evidence effective from 1st april, 2014notwithstanding anything contained in any other law for the time being in force, any document reproducing or derived from returns and documents filed by a company with the registrar on paper or in electronic form or stored on any electronic data storage device or computer readable media by the. Is redressal under section 397398 of companies act, 1956. Law on oppression or mismanagement us 397, 398 companies. I do strongly feel that an effective enforcement of provisions like 397 398 of the act and the protection of rights of all shareholders without any scope for misuse or abuse is very important for the growth of industry or the corporate world. Under the 20 act, members can seek relief against conduct of affairs in a manner prejudicial to public interest or oppressive to him or any member or members or prejudicial to the interests of the company even though it may not amount to oppression. Chinoys submission regarding the nonarbitrability of disputes validly brought under sections 397 398 read with section 402 of the companies act, 1956 is that it is not enough for an applicant seeking a reference to arbitration merely to show that there exists an arbitration agreement. It dituzcted that during this hearing the both the insolvency proceedines be tatreed tooether. If the petitioner contends that the property has been sold at throw away price, obtain certified copy of sale deeds from subregistrar office in respect of some other property in the same locality during the same period and attach it with the petition. We all know the legal position under section 397 398 of the companies act, 1956 and the changes from to time.

I do strongly feel that an effective enforcement of provisions like 397 398 of the act and the protection of rights of all shareholders without any scope for misuse or abuse is very important for the growth of. Apr 10, 2012 majority powers and minority rights click to edit master subtitle style. It is very clear from several judgments that whenever a civil dispute arises, even if under company law, the civil courts jurisdiction can never be ousted. A company is a separate legal entity different from the directors. Generally, many conflicts and controversies arise in the general meetings amongst groups of shareholders during the process of the removal of a director. Consequently, the present writ petition being bereft of merit is dismissed along with the applications.

It is also settled law that under sections 397 and 398 of the companies act, relief can be granted even contrary to any articles of association, which an arbitrator cannot do as he is a creature of the contract i. Any members of a company who complainthat the affairs of the company 3 are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company. The very interesting thing under section 397 398 of the companies act, 1956 is as to when the disputes arise between the parties to a joint venture agreement or understanding and raising these joint venture disputes pertaining to two separate legal entities in the joint venture company which is called special purpose vehicle very often. If the order has been passed under a section other than the listed down sections then select others and specify the section under which order has been passed. Its all depends upon the facts and circumstances of the case. A brief on complications under section 397398 of companies act. Section 397 of companies act, 20 admissibility of certain.

Section 243 application for winding up of company or an order under section 397 or 398. Any member of a company who complain that the affairs of the company are being conducted in manner oppressive to any member. Mismanagement and oppression are covered under section 241, chapter xvi of the companies act, 20 which corresponds to section 397 and 398 of the earlier companies act, 1956. National company law appellate tribunal new delhi company. Sections 397 398 of the act voting rights sections 286, 300 and 108 of the companies act financial mismanagement or not held that. The case was subsequently transferred to national company law tribunal, mumbai special bench. Sections 397 398 and other connected provisions of companies act, 1956 meant to provide relief to the minority shareholders against the majority when minority are oppressed or the property of the company is mismanaged. Arbitrability of oppression and mismanagement petitions in. Minority rights on oppression and mismanagement under. A critical analysis amit kumar pathak and siddarth singh introduction the majority wish prevails on all matters of company management and administration and courts do not generally interfere to protect the minority against the consequences of a resolution passed by the majority. Companies act, 20 under the column, facts of the case plead the origin of the company, activities of the. Those petitions ere represented the debtor companss throuoh its representatfxs and those petitions in the past were posted 10 19. A learned single judge of the bombay high court recently considered in rakesh malhotra v. Section 397 in the companies act, 1956 indian kanoon.

Majority powers and minority rights government information. Jurisdiction of civil court in company law matters ipleaders. Chapter vi of companies act, 1956 deals with oppression and mismanagement and contains sections 397 to 409, important sections being 397, 398, 399, 402 and 403 of the act. Oppression and mismanagement drafting of petitions. There are so many lengthy judgments on section 397 398 of the companies act, 1956 in view of complications and the stakes involved. The act provides for the remedy against the majority in a company who resort to oppression and mismanagement.

A brief on complications under section 397398 of companies. Sections 397 and 398 of the companies act, 1956 the act, complaining that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to the members. The changes in the legal position under section 397 398 of the companies act, 1956 are as follows. Application to company law board for relief in cases of mismanagement. Provision of section 397 and 398 of 1956 act are combined in section 241 of 20.

The petitioners fulfil the requirements of section 399 of the act for filing a petition under sections 397 398 of the act as they hold more than onetenth of the paid up capital of the cooperative co. Jun 08, 2018 a relevant sec is there in the companies act where the process of prevention of mismanagement is discussed. Statutory provisions in this regard have been provided under the companies act, 1956 ca 1956, which is being replaced by the companies act, 20 ca 20. Right of central government to apply under sections 397 and 398. Explore the companies act 20 and companies act 1956. Powers of company law board on application under sections 397 or 398. Initially, the members are supposed to establish a strict case against the company for getting relief. In spite of all these decisions, there are judgments stating that the matters under s. The practical lawyer power of the company law board in. Select the section of the companies act, 1956 or of companies act, 20 under which the order has been passed. In fact, the issue of cause of action and law of limitation can not be separated while dealing with the law under section 397398 of the companies act, 1956 and the issue of limitation has little significance. The provisions of law of limitation will have no application to a petition under section 397398 of companies act, 1956. Application of sections 539 to 544 to proceedings under sections 397 and 398. In fact, the issue of cause of action and law of limitation can not be separated while dealing with the law under section 397 398 of the companies act, 1956 and the issue of limitation has little significance.