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The oppression of minority or mismanagement of a company by majority therefore calls for some remedial action. In such a case, the minority shareholders may apply to1. The tribunal for the winding up of the company on the ground that it is just and equitable to do so ( this will be discussed in the chapter on winding up) 2. The tribunal for appropriate relief (short of winding up): 3. The central government for appropriate relief.
PREVENTION OF OPPRESSION
Sec. 397 provides that a requisite number(as laid down in Sec. 399) of members of a company that the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members, may apply to the tribunal for appropriate relief. There is oppression if it justifies winding up. Oppression must be of such a nature as will make it just and equitable for the tribunal to wind up the company, but to order winding up would unfairly prejudice the interest of the oppressed member or members, and the remedy of winding up to eliminate oppression may be worse than the disease itself. Relief by the tribunal. The tribunal may give relie if it is of opinion1. That the companys affairs are being conducted a. In a manner prejudicial to public interest, or b. Ina manner oppressive to any member or members: 2. That the facts justify the compulsory winding up order on the ground that it is just and equitable that the company should be wound up: 3. That to wind p the company would unfair prejudice the applicants On being satisfied about the above requirement, the tribunal may pass such order as it thinks fit with a view to bringing an end to the matters complained of.
This provision would help salvage an otherwise sound concern which would have been, ut for this principle, forced to go into winding up. Meaning of oppression. As regards meaning of the term oppression ( in the
contex of sec. 397) lard cooper observed in Elder v. Elder & Watson Ltd. (1952) S.L.T. 112 : the essence of the matter seems to be that the conduct complained of should at the lowest involve the condition of fair play on which every shareholder who entrusts his money to the company is entitled to rely.
Sec.399 does not limit the right to apply under sec. 397 or 398 to members holding equity shares only; the preference shareholders may also apply for the appropriate relief. Joint owners to be treated as one member. Where any shares or shares is/ are held by two or more persons jointly. They shall be counted only as one member. Consent in writing of other member. Where any members of a company are entitled to make an application, any one or more of them may obtain the consent in writing of the rest and may them make an application on behalf and for the benefit of them. Withdrawal of consent. Once the petition is presented, it cannot be withdrawn without the sanction of the tribunal ( formerly court) [ Jacob cherian v. K.n. cherian (1973) 43 comp. Cas. 235]. The validity of the application under sec. 399 must be judged on the facts as they were at the time of presentation of the application. If the application is valid when presented, it does not cease to be maintainable merely because some of the application has transferd their
shares and ceased to be the shareholders of the company (Jagdish chand Mehra V. The New Indian Embroidery Mills Ltd.) (1964).