SECTION 241 APPLICATION TO TRIBUNAL FOR RELIEF IN CASES OF OPPRESSION, ETC.
Updated: Oct 7, 2022
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01. Any employee who raises a grievance against (Refer to the 2016 National Company Law Tribunal Rules, Rules 81 and 82.)
The company's affairs have been or are being conducted in a way that is harmful to the public interest, harmful to him or any other member (meaning the person who signed the company's memorandum, who will be considered to have consented to join the business and who, upon the company's registration, will be listed as a member in its register of members; every other individual whose name is listed in the company's register of members and who formally accepts membership in writing; every shareholder listed as a beneficial owner in a depository's records who also holds shares of the company)[1]or members, or harmful to the interests of the company; or
The material change in the management or control of the company has occurred, whether through an alteration (includes making changes such as substitutions, exclusions, and additions.)[2] in the Board of Directors (signifies the entire board of directors for a firm when referring to it)[3], manager (includes a director or any other person holding the title of manager, by whatever name called, whether under a contract of service or not, and who has management of the entirety, or substantially the entirety, of a company's affairs under the supervision, control, and direction of the Board of Directors)[4], or ownership of the company's shares, and is not a change brought about by or in the interests of any creditors, including share(signifies a share in a company's share capital, which also includes stock)[5] holders or any class of shareholders of the company any other way, and that as a result of such change, it is likely that the company's affairs will be conducted in a manner prejudicial to its interests or those of its members or any class of members, may apply to the Tribunal (National Company Law NCLT- NCLT[6] is a quasi-judicial[7] body which is authorised for dealing with the corporate disputes which are civil and arising under the Companies Act) for an order under this Chapter, provided that such member has the right to do so under section 244.
02. The Central Government may submit its application to the Tribunal for an order under this Chapter if it believes that the company's business practices are contrary to the public interest (Refer to Rule 88 National Company law Tribunal Rules 2016)[8].
The applications under this subsection must be made before the Principal Bench of the Tribunal, and those applications must be made regarding the company or class of companies that may be prescribed.
03. [9]If, in the Central Government's opinion, there are indications that:
Any person involved in the conduct and management of a company's affairs is or has been connected therewith guilty of fraud, misfeasance, persistent negligence, default in carrying out his obligations and functions under the law, or breach of trust;
The company's business is not or has not been conducted and managed by such person by so and so's rules and regulations;
A business is or has been run and managed by that person in a way that is likely to cause, or has already caused, severe harm to the interests of the industry, trade, or business to which that business belongs; or
If a person has conducted or is conducting business for a company with the intent to defraud its creditors, members, or any other person, or for any other fraudulent or illegal purpose, or in a way that is detrimental to the public interest, the Central Government may bring a case against that person and refer it to the Tribunal with the request that the Tribunal investigate the case and decide regarding whether or not that person is a fit and proper person.
04. [10]The person who is named as a respondent to the application and who has a case referred to the Tribunal under subsection (3).
05. [11]Every application made under subsection (3) must comply with the following requirements:
Be signed and verified by the Central Government in the manner specified in the Code of Civil Procedure, 1908, for the signature and verification of a plaint in a lawsuit; and
Contain a concise statement of any facts and materials that the Central Government deems necessary for the investigation's purposes.
Rules for such orders
Rule 81 Application under section 241
A request made under clause (b) of subsection (1) of section 241 of the Act must be made in writing and include the supporting documentation listed in Annexure B[12].
When an application is submitted under Section 241 on behalf of any members of a company eligible to apply under Subsection (1) of the said Section, by any one or more of them, the letter of consent signed by the remaining members of the company eligible to present the petition on their behalf shall be annexed to the application. The names and addresses of all the members on whose behalf the application is submitted shall also be included.
The Company, other respondents, and any other individuals the Tribunal directs must receive copies of every application lodged by this rule.
Rule 82 Withdrawal of Application which is under section 24
A request made under clause (a) or clause (b) of subparagraph (1) of section 247 of the Act may not be withdrawn without the Tribunal's permission.
The Form Number NCLT 9[13] must be used to submit an application for withdrawal under Subrule (1).
Rule 88 Reference to the Tribunal
Any referral to the Tribunal made by the Registrar of Companies under Section 441 of the Act, any referral to the Tribunal made by the Central Government under the proviso to Subsections (5) of Sections 140, 221, Subsection (2) of Section 224, Subsection (5) of Section 224, Subsection (2) of Section 241 of the Act, any referral made under Subsection (2) of Section 75, any complaint made by any person under Subsection (1) of Section 222, or any reference made by a firm under clause (c) of sub-section (4) of section 22A of the Securities Contracts (Regulations) Act, 1956, must be made through a petition or application in Form No. NCLT. 9 in Annexure A and be supported by the papers listed in Annexure B[14].
What is National Company Law NCLT?
It is a quasi-judicial body which is authorised for dealing with the corporate disputes which are civil and arising under the Companies Act
The current President of NCLT is Chief Justice (Retd.) Ramalingam Sudhakar[15].
Functions-
NCLT will handle all actions under the Companies Act, including arbitration, agreements, compromises, reconstruction, and corporate wound-up.
Not a single civil court will have jurisdiction over the before-mentioned matters.
The cases which are pending before the (BIFR) Board for Industrial and Financial Reconstruction[16] as well as those pending under the Sick Industrial Companies (Special Provisions) Act, 1985, might be heard by the NCLT.
Also, matters pending before the Appellate Authority for Industrial and Financial Reconstruction will be taken up.
It can also take on matters involving corporate oppression and mismanagement.
Benches of National Law NCLT[17]-
Locations |