• Case challenged on grounds of section 241 of companies act 2013

Request you to kindly provide resolution from Respondent perspective i.e. Mr. B.

Facts of case:


Mr A, an NRI wanted to come down in India in future for settling down. Mr. B his relative was already in India who offered to incorporate a company. Accordingly, accompany was incorporated initially by Mr. B and his wife. Mr. A sent the money to his mother who became a majority shareholder. 5000 equity shares of Rs. 100 each were allotted to her. Shares were later transferred by mother to Mr. A and his wife after obtaining requisite approval from RBI.

Mr. B and one relative were directors of the company, but Mr. B never contributed to capital when company was making losses. However, he was getting salary from company. Later on Mr. B got himself allowttted 7000 share on one occasion and again 5000 shares on another occasion. Except photocopy of minutes no other records of board meeting was made available by Mr. B. After Mr. A came to India he discovered that he has been reduced to minority. He challenged the allotment.

Petitioner appeal:

a) Grounds of section 241 of companies act 2013 i.e. oppression and mismanagement
b) whetehr it is rights issue or private placement
Asked 7 years ago in Business Law

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7 Answers

An application may be filed for a complaint u/s241 of the Actthat:

(a) The affairs of the company have been or are being conducted

in a manner prejudicial to the public interest, or

In an manner prejudicial or oppressive to him or any other member or members, or

In a manner prejudicial to the interests of the company; or

(b) The material change has taken place in the management or control of the company, whether by;

An alteration in the Board of Directors, or

Manager, or

In the ownership of the company’s share, or

If it has no share capital, in its membership, or

In any other manner whatsoever, and

that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members. These changes should not be a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company.

Devajyoti Barman
Advocate, Kolkata
22920 Answers
498 Consultations

5.0 on 5.0

Private Placement is issuing share capital to a select group of people, including or not the existing shareholders, like friends, family members, Angel investors, Venture Capitalists etc.

2) OFFER LETTER

1. Offer letter in form

2. Application form serially numbered

3. Addressed to specific person

4. In writing or electronic mode.

5. Special Resolution – basis or justification of pricing (including premium) to be made in explanatory statement.

6Payment to be made from bank A/c of person subscribing.

7Company to keep record of such Bank A/C

8Maintain complete record to be filed with ROC

3) offer letter should contain

1. Business carried out by the company and its subsidiaries, if any.

2. Purpose and object of offer

3. Time schedule for which offer is valid.

4. Price of offer and its justification.

5) name and address of valuer

4) it appears to be private placement of shares and not rights issue as not offered to existing shareholders of the company

Ajay Sethi
Advocate, Mumbai
95205 Answers
7607 Consultations

5.0 on 5.0

Well,unless and until I get to now the actual ground of challenge how could I provide the point so defence.

It is premature query and let an appeal be filed first so I can give point of defence.

Devajyoti Barman
Advocate, Kolkata
22920 Answers
498 Consultations

5.0 on 5.0

(i) Whether notice was sent for convening Board Meeting atleast 7 days before convening the Board Meeting.?

(Ii)whether the approval of private placement offer Letter.was on agenda .?whether EGM was called for considering private placement ?

3) whether special resolution was passed in EGM for private placement ?

Ajay Sethi
Advocate, Mumbai
95205 Answers
7607 Consultations

5.0 on 5.0

Application can be made under section 241 of companies act 2013 if affairs of company are being conducted in manner prejudicial to interests of company

In the present case if material change is being made in shareholding of company without following due procedure application can be made to tribunal under section 241 of companies act 2013

Ajay Sethi
Advocate, Mumbai
95205 Answers
7607 Consultations

5.0 on 5.0

Petitioner appeal:

a) Grounds of section 241 of companies act 2013 i.e. oppression and mismanagement

b) whetehr it is rights issue or private placement

241. Application to Tribunal for relief in cases of oppression, etc

(1) Any member of a company who complains that—

(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company;

or

(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company’s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members,may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter.

Thus a petitioner can file a petition to this effect on the above provisions of law seeking releif and remedy to this.

T Kalaiselvan
Advocate, Vellore
85404 Answers
2236 Consultations

5.0 on 5.0

Thanks for the prompt response. However we need views from defendant's perspective since we are on the defendant side. Need your help to understand the grounds on which we can counter the appeal made by the petitioner. Further, this is a private company.

From the defendant point of view, you should analyse the facts and the situation including the documentary proofs filed agaisnt you. Try to repudiate all the claims/allegations made out in the petition based on the merits and evidences in your side.

Dont accept the alegations on any count and keep your options for preferring an appeal if the decision is going against you, this will make the opponents feel more depressed and they may settle down through a negotiation table.

T Kalaiselvan
Advocate, Vellore
85404 Answers
2236 Consultations

5.0 on 5.0

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