POINTS

EXPLANATION

1. Right of member to apply to the Tribunal:

Any member of a company who complains that:

1. 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
2. the material change, not being a change brought about by, or in the interest 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 any reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interest 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.

Section 241(1) addresses complaints with respect to the conduct of the company’s affairs, which could be prejudicial to public interest and prejudicial or oppressive to the members or the company itself.

The provision gives right to the members to move to the Tribunal not only in case of complaints of oppression but also in case of complaints that the conduct of the affairs of the company has been ‘prejudicial’ to them.

Section 241(1)(a) also provides for past acts of oppression.

This section also provides remedy for mismanagement in the affairs of the company. It states that a member may complain that “the affairs of a company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company”.

A member of a company may also complain in case there is a material change in the management and such change is likely to be prejudicial to the interests of the company or its members or any class of members.

Material change in the management may occur if there is:

1. an alteration in the Board of Directors or manager; or
2. an alteration in the ownership of the company’s shares; or
3. an alteration in the membership if the company has no share capital; or
4. an alteration in any other manner, whatsoever.

2. Central Government may apply suo moto to the Tribunal:

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.

Provided that the applications 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.

3. Initiation of case by CG:

Where in the opinion of the Central Government there exist circumstances suggesting that

1. 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.
2. the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices.
3. a company is or has been conducted and managed by such person in a manner which is 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
4. the business of a company is or has been conducted and managed by such person with intent to defraud 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 initiate 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 such person is a fit and proper person to hold the office of director or any
other office connected with the conduct and management of any company.