Amended and updated notes on section 241 of the Companies Act 2013. Detail discussion on provisions and rules related to application to Tribunal for relief in cases of oppression, etc.
Chapter XVI (Sections 241–246) of the Companies Act, 2013 (CA 2013) deals with the provisions related to prevention of oppression and mismanagement. Section 241 of CA 2013 provides for application to Tribunal for relief in cases of oppression, etc.
Recently, we have discussed in detail section 240 (Liability of officers in respect of offences committed prior to merger, amalgamation, etc.) of CA 2013. Today, we learn the provisions of section 241 of the CA 2013.
The provisions of section 241 are effective from 1st June, 2016. You may refer Notification No. S.O. 1934(E) issued dated 01.06.2016. In this article, you will learn detail of the provisions of section 241 of the Companies Act 2013 as amended by the Companies (Amendment), Act 2019 with effective from 15th August 2019.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XVI |
| Chapter Name | Prevention of Oppression and Mismanagement |
| Section No. | 241 |
| Section Name | Application to Tribunal for relief in cases of oppression, etc. |
| Monthly Updated Edition | Company Law PDF |
Section 241 (Application to Tribunal for relief in cases of oppression, etc.) of Companies Act 2013
Section 241(1):
Section 241(1) Right to Apply by Member: Any member of a company may apply to the Tribunal to complain that affairs of the company—
(a) Have been or are being conducted in a manner:
- prejudicial to public interest or
- prejudicial or oppressive to him or any other member or members or
- prejudicial to the interests of the company; or
(b) Will be conducted in a manner prejudicial to its interests or its members or any class of members by reason of any material change taken place in the management or control of the company, whether by an alteration in the:
- Board of Directors; or
- Manager; or
- Ownership of the company’s shares; or
- Membership (If company has no share capital).
However, such change does not include a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company.
Note that such member can apply to tribunal only if he has a right to apply under section 244 (Right to apply under section 241), for an order under Chapter XVI.
Section 241(2):
Section 241(2) Right to Apply by CG: The Central Government may apply to the Tribunal for an order under Chapter XVI if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest.
The applications u/s 241(2) in respect of prescribed company or class of companies shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.
Section 241(3):
Section 214(3) CG refer Case to Tribunal: CG may initiate a case against a person to the Tribunal if following circumstances exist:
(a) Affairs of company conducted and managed by a person 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.
(b) Business of a company not conducted and managed in accordance with sound business principles or prudent commercial practices.
(c) Company conducted and managed by such person in a manner which cause serious injury or damage to the interest of the trade, industry or business to which such company pertains.
(d) Business of a company 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.
CG refer case to the Tribunal with a request that the Tribunal may inquire into the case and record a decision as to whether or not 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.
Section 241(4):
Section 241(4) Respondent: The person against whom CG refer case to Tribunal u/s 241(3) shall be joined as a respondent to the application.
Section 241(5):
Section 241(5) Statement with Signed Application: Every application u/s 241(3) shall:
(a) Contain a concise statement of such circumstances and materials as CG may consider necessary for the purposes of the inquiry; and
(b) Signed and verified in the manner laid down in the Code of Civil Procedure, 1908, for the signature and verification of a plaint in a suit by the Central Government.
Note that Sub-sections (3), (4) and (5) of section 241 was newly inserted by Companies (Amendment), Act 2019 with effective from 15th August 2019.