Content Provider | Supreme Court of India |
---|---|
e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Companies Act 2013: ss. 241 and 242 |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Disposed Off |
Headnote | Companies Act, 2013 – ss. 241 and 242 – Held: The sine qua non for invoking s.241 is that the affairs of the Company should have been conducted or are being conducted in a manner oppressive or prejudicial to some of the members – In a petition u/ s.241, the Tribunal cannot ask the question whether the removal of a Director was legally valid and/or justified or not – The question to be asked is whether such a removal tantamount to a conduct oppressive or prejudicial to some members – Even in cases where the Tribunal finds that the removal of a Director was not in accordance with law or was not justified on facts, the Tribunal cannot grant a relief u/s.242 unless the removal was oppressive or prejudicial – There may be cases where the removal of a Director might have been carried out perfectly in accordance with law and yet may be part of a larger design to oppress or prejudice the interests of some members – It is only in such cases that the Tribunal can grant a relief u/s.242 – The validity and justification for the removal of a person can never be the primary focus of a Tribunal u/s.242 unless the same is in furtherance of a conduct oppressive or prejudicial to some of the members – On facts, the removal of a person from the post of Executive Chairman cannot be termed as oppressive or prejudicial –The original cause of action for the complainant companies to approach NCLT was the removal of CPM from the post of Executive Chairman – Though the complainant companies padded up their actual grievance with various historical facts to make a deceptive appearance, the causa proxima for the complaint was the removal of CPM from the office of Executive Chairman – His removal from Directorship happened subsequent to the filing of the original complaint and that too for valid and justifiable reasons and hence NCLAT could not have laboured so much on the removal of CPM, for granting relief u/ss.241 and 242. Company Law – Held: Company Tribunal is not a labour Court or an administrative Tribunal to focus entirely on the manner of removal of a person from Directorship. Company Law – Winding up order on just and equitable grounds – Held: There must lie a justifiable lack of confidence in the conduct and management of the company’s affairs, at the foundation of applications for winding up – The case on hand does not fall anywhere near the just and equitable standard, for the simple reason that it was the very same complaining minority whose representative was not merely given a berth on the Board but was also projected as the successor to the Office of Chairman – For invocation of just and equitable clause, there must be a justifiable lack of confidence on the conduct of the directors – A mere lack of confidence between the majority shareholders and minority shareholders would not be sufficient – On facts, Tata Sons is a principal investment holding Company, of which the majority shareholding is with philanthropic Trusts – The majority shareholders are not individuals or corporate entities having deep pockets into which the dividends find their way if the Company does well and declares dividends – The dividends that the Trusts get are to find their way eventually to the fulfilment of charitable purposes – Therefore, NCLAT should have raised the most fundamental question whether it would be equitable to wind up the Company and thereby starve to death those charitable Trusts, especially on the basis of un-charitable allegations of oppressive and prejudicial conduct – Finding of NCLAT that the facts otherwise justify the winding up of the Company under the just and equitable clause, was completely flawed. Companies Act, 2013 – ss. 241 and 242 – ss.241 and 242 do not specifically confer the power of reinstatement, nor there is any scope for holding that such a power to reinstate can be implied or inferred from any of the powers specifically conferred – The architecture of ss.241 and 242 does not permit the Tribunal to read into the Sections, a power to make an order (for reinstatement) which is barred by law vide s.14 of the Specific Relief Act, 1963 with or without the amendment in 2018.Company Law – Law relating to oppression and mismanagement – Held: Despite the law relating to oppression and mismanagement undergoing several changes, the object that a Tribunal should keep in mind while passing an order in an application complaining of oppression and mismanagement, has remained the same for decades – This object is that the Tribunal, by its order, should bring to an end the matters complained of – The purpose of an order both under the English Law and under the Indian Law, irrespective of whether the regime is one of “oppressive conduct” or “unfairly prejudicial conduct” or a mere “prejudicial conduct”, is to bring to an end the matters complained of by providing a solution – The object cannot be to provide a remedy worse than the disease – The object should be to put an end to the matters complained of and not to put an end to the company itself, forsaking the interests of other stakeholders. Company Law – Articles of Association of a company – Held: That Articles of Association of a company constitute a contract among shareholders, is the bedrock of Company Law – A person who willingly became a shareholder and thereby subscribed to the Articles of Association and who was a willing and consenting party to the amendments carried out to those Articles, cannot later on turn around and challenge those Articles – The same would tantamount to requesting the Court to rewrite a contract to which he became a party with eyes wide open. Companies Act, 2013 – s.241 – s.241 is not intended to discipline a Management in respect of a possible future conduct. Companies Act, 2013 – s.242 – Articles of Association of a company – Held: The Tribunal has the power u/s.242 to set aside any amendment to the Articles that takes away recognised proprietary rights of shareholders – But this is on the premise that the bringing up of amendment itself was a conduct that was oppressive or prejudicial – On facts, the order of NCLAT tinkering with the power available under Article 75 of the Articles of Association was wholly unsustainable. |
Judge | Hon'ble Mr. Justice Ajjikuttira Somaiah Bopanna Honble Mr. Justice Sharad Arvind Bobde Hon'ble Mr. Justice V. Ramasubramanian |
Neutral Citation | 2021 INSC 217 |
Petitioner | Tata Consultancy Services Limited |
Respondent | Cyrus Investments Pvt. Ltd. And Ors. |
SCR | [2021] 12 S.C.R. 903 |
Judgement Date | 2021-03-26 |
Case Number | 440 |
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