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Companies Act 1956

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Principle of Majority RulesManagement of Company is based on Majority Rules

Foss Vs Harbottle

Two minority share holders alleged that directors andsolicitors of the company were guilty of fraudulent actswhich resulted in loss to the company.

Requested to take action for damages.

Court dismissed the petition on the grounds that theacts of the directors were capable of confirmation bythe majority of share holders.

Exception: Oppression and Mismanagement

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Oppression - MeaningConduct should beVisible departure from standards of their dealingViolation of Fair Play

Complaining member should prove that he issuffering from oppression in the capacity of memberand not in any other capacity.

Affairs of the company Prejudicial to the Public Interest

Prejudicial to the interest of the companyReliefApply to National Company Law Tribunal or Central

Govt.

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Who can apply ?Not Less than 100 members or 1/10 of total number

whichever is less

Any Member holding 1/10th of share capital1/5th of total number if no share capital

Trustees of share holder/ member

Legal representative

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Acts OfOppression and MismanagementActs of Oppression

y Not calling General Board Meetingy Non Maintenance of statutory Recordsy Deprive right to Dividend, Transfer of Shares, Irregularities

in the allotment of shares, Issue further shares to a section ofshare holders

Acts of Mismanagementy Illegal constitution of boardy

Serious in-fight between Directorsy Gross neglect of companys interesty Diversion of fundy Violate AoA and MoAy Advance Loan to Director

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Groundsy Default in holding statutory meeting

y Failure to commence business within a year of

incorporationy Reduction in Membership

y Insolvent

y Failure of objective, Mismanagement

y Dead Lock in the management of company

y Failure to file annual reports

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Who can petition in India?Company

Creditors

ContributoryCentral Govt.

Registrar

Official Liquidator

Supreme Court of India has ruled that workers ofa company can not prefer winding up petitionagainst company

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Withdrawal of consenty Once the petition is presented, it cannot be withdrawn

without the sanction of Company Law Board/Tribunal.

y The validity of application under sec 399 must bejudged on the facts as they were at the time ofpresentation of the application.

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k Thank

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