POINTS

EXPLANATION

1. Filing of application before the Tribunal on behalf of the members or depositors [Sub-section (1)]:
 

Such number of member or members, depositor or depositors or any class of them, as the case may be, as are indicated in sub-section (3) may, if they are of the opinion that the management or conduct of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or depositors, file an application before the Tribunal on behalf of the members or depositors for seeking all or any of the following orders, namely:

1. to restrain the company from committing an act which is ultra vires the articles or memorandum of the company.
2. to restrain the company from committing breach of any provision of the company’s memorandum or articles.
3. to declare a resolution altering the memorandum or articles of the company as void if the resolution was passed by suppression of material facts or obtained by misstatement to the members or depositors.
4. to restrain the company and its directors from acting on such resolution.
5. to restrain the company from doing an act which is contrary to the provisions of this Act or any other law for the time being in force.
6. to restrain the company from taking action contrary to any resolution passed by the members.
7. to claim damages or compensation or demand any other suitable action from or against:

• the company or its directors for any fraudulent, unlawful, or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part.
• the auditor including audit firm of the company for any improper or misleading statement of particulars made in his audit report or for any fraudulent, unlawful, or wrongful act or conduct; or
• any expert or advisor or consultant or any other person for any incorrect or misleading statement made to the company or for any fraudulent, unlawful, or wrongful act or conduct or any likely act or conduct on his part.

2. Liability of Audit Firm and its Partners [Sub-section (2)]:

Where the members or depositors seek any damages or compensation or demand any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner.

3. Requisite number of members to apply [Sub-section (3)]:

1. The requisite number of members provided in sub-section (1) shall be as under:

• in the case of a company having a share capital, not less than one hundred members of the company or not less than such percentage of the total number of its members as may be prescribed, whichever is less, or any member or members holding not less than such percentage of the issued share capital of the company as may be prescribed, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares.
• in the case of a company not having a share capital, not less than one-fifth of the total number of its members.

2. The requisite number of depositors provided in sub-section (1) shall not be less than one hundred depositors or not less than such percentage of the total number of depositors as may be prescribed, whichever is less, or any depositor or depositors to whom the company owes such percentage of total deposits of the company as may be prescribed.
   
   The requisite number of depositor or depositors to file an application under sub-section (1) of section 245 shall be:

• (a) at least five percent of the total number of depositors of the company; or
  (b) one hundred depositors of the company, whichever is less; or
• depositor or depositors to whom the company owes five percent of total deposits of the company.

4. Requirements for consideration of application [Sub-section (4)]:

In considering an application under sub-section (1), the Tribunal shall take into account, in particular.

1. whether the member or depositor is acting in good faith in making the application for seeking an order.
2. any evidence before it as to the involvement of any person other than directors or officers of the company on any of the matters provided in clauses (a) to (f) of sub-section (1).
3. whether the cause of action is one which the member or depositor could pursue in his own right rather than through an order under this section.
4. any evidence before it as to the views of the members or depositors of the company who have no personal interest, direct or indirect, in the matter being proceeded under this section.
5. where the cause of action is an act or omission that is yet to occur, whether the act or omission could be, and in the circumstances would be likely to be:

• authorized by the company before it occurs. or
• ratified by the company after it occurs.

6. where the cause of action is an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company.

5. In case of admission of application [Sub-section (5)]:
 

If an application filed under sub-section (1) is admitted, then the Tribunal shall have regard to the following, namely:

1. public notice shall be served on admission of the application to all the members or depositors of the class in such manner as may be prescribed.
2. all similar applications prevalent in any jurisdiction should be consolidated into a single application and the class members or depositors should be allowed to choose the lead applicant and in the event the members or depositors of the class are unable
   to come to a consensus, the Tribunal shall have the power to appoint a lead applicant, who shall be in charge of the proceedings from the applicant's side.
3. two class action applications for the same cause of action shall not be allowed.
4. the cost or expenses connected with the application for class action shall be defrayed by the company or any other person responsible for any oppressive act.

6. Order of Tribunal to be binding [Sub-section (6)]:

Any order passed by the Tribunal shall be binding on the company and all its members, depositors and auditor including audit firm or expert or consultant or advisor or any other person associated with the company.

7. Punishment for non-compliance [Sub-section (7)]:
 

Any company which fails to comply with an order passed by the Tribunal under this section shall be punishable with fine which shall be at least five lakhs rupees but which may extend to twenty-five lakhs rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and with fine which shall be at least twenty-five thousand rupees but which may extend to one lakh rupees.