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Oppression and Mismanagement under the Companies Act, 2013.

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Dated: 2-6-2022


Oppression and Mismanagement under the Companies Act, 2013.

A Petition was filed in NCLT, Kochi under Sections 59, 213 and 241-242 of the Companies Act, 2013 by Smt. Laly Joseph ('Petitioner') against M/s. Indo Asian News Channel Private Limited & 2 others alleging oppression and mismanagement in the affairs of M/s. Indo Asian News Channel Private Limited.

The petitioner lady requested Respondent No. 2 and 3 to start a television news channel.The above company was incorporated. 

The facts of the case being that Petitioner was cheated upon and deceived by the Respondents. The Petitioner ought to have become an Equity Shareholder holding 99.99% of the Equity Capital of the Company from the date of incorporation but due to the misdoings of Respondents her shareholding was reduced to 42%, then 5% and finally to 2.40%. 

Petitioner had to lodge a complaint with Thodupuzha Police Station, Kerala against the Respondents. The aforementioned Respondents incorporated two other companies and used the advertising services of M/s. Indo Asian News Channel Private Limited but refused to pay the advertising bills of the latter. 

Respondents have taken control of the management and ownership by adopting illegal means, siphoned off the funds of the Company and altered the composition of the Shareholding Pattern of the company to take complete control of it.

In the case of Thomas Vettom (V.J.) V. Kuttanad Rubber Company Limited (1991) held that:-

"the complaint of minority shareholders in the conduct of the affairs of the Company will not, normally persuade a Court to interfere in the matter and it is only when the court has reliable information before it, where the majority acts are against the provisions of the Articles of Association or the statute covering it, or makes any arbitrary use of the majority powers, resulting or likely to result in financial loss or where action could be characterized as unfair and improper, the court will exercise its powers under Sections 397 and 398 of the Companies Act, 1956".

The understanding or promises made between two parties before the incorporation of the company cannot be considered as an "oppression and mismanagement" in the Company under Section 241-242 of the Companies Act, 2013.

Held by the hon'ble tribunal that the Respondent established this company with the help of the Petitioner's funds, accordingly an appropriate valuation of the shares of the Petitioner may be done to enable the Petitioner to leave the company with fair value and fair interest. 

The Tribunal ordered that the shareholding pattern of the Petitioner may not be altered to her disadvantage and it remain the same as at the time of the incorporation of the company. The fees of the valuation shall be paid by M/s. Indo Asian News Channel Private Limited to be decided mutually between the valuer and the aforesaid company. 

Although under the scheme of Companies Act, 1956 and 2013 the duty being to primarily protect the interests of the company and its constituent shareholders against any act of oppression and mismanagement, yet the Tribunal has been humble enough to the lady Petitioner allowing her a decent exit from the Company and to prevent any further act of "oppression and mismanagement".


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