NCLT LEGAL SERVICES
The NCLT is a quasi-judicial authority created under the Companies Act, 2013 to handle corporate civil disputes arising under the Companies Act. NCLT is obliged to objectively determine facts, decide cases in accordance with the principles of natural justice and draw conclusions from them in the form of orders.
At Dr. Khattri & Associates, our team of best lawyers for NCLT cases, specialize in filing petitions under Section 241 of The Companies Act, 2013 in cases of oppression and mismanagement of minority shareholders by the management of a Company.
We specialize in filing cases for investigations into affairs of a company with the Registrar of Companies under Section 206 for Inspection, Inquiry and Investigation into affairs of a Company.
Oppression means, lack of morality and fair dealings in the affairs of the company which may be prejudicial to some members of the company. On the other hand, Mismanagement refers to the process or practice of managing ineptly, incompetently, or dishonestly.
Section 241(1) of the Companies Act states that any member of a company who complains that the affairs of the company have been or are being conducted in a manner prejudicial (damaging) to the interests of the company, its members or the public at large may apply to the Tribunal for an order for investigations into the affairs of the Company.
Powers of NCLT in cases of oppression and mismanagement
Under the provisions of Section 242 (2), NCLT may allow relief to the complaining shareholders in case of oppression or mismanagement, some of which include:
Regulation of the company's future affairs;
Direction to purchase the company's shares by other members;
Restriction on transfer of allotment;
Termination, setting aside, modification of any agreement between the company and its management;
Termination, setting aside, modification of any agreement between the company and any third person;
Setting aside of any transaction of transfer, delivery, payment, execution, etc.;
Removal of any member of the management;
Recovery of undue gains made by the management;
Appointment of the members of the management;
Imposition of costs.
Powers of Registrar of companies in case of Mismanagement
Section 206 of the Companies Act, 2013 gives the Registrar of Companies (the "ROC") the power to call for information, inspect books and conduct inquiries in respect of any company.
(1) Where on a scrutiny of any document filed by a company or on any information received by him, the Registrar is of the opinion that any further information or explanation or any further documents relating to the company is necessary, he may by a written notice require the company -
(a) to furnish in writing such information or explanation; or
(b) to produce such documents, within such reasonable time, as may be specified in the notice.
(2) On the receipt of a notice under sub-section (1), it shall be the duty of the company and of its officers concerned to furnish such information or explanation to the best of their knowledge and power and to produce the documents to the Registrar within the time specified or extended by the Registrar:
Provided that where such information or explanation relates to any past period, the officers who had been in the employment of the company for such period, if so called upon by the Registrar through a notice served on them in writing, shall also furnish such information or explanation to the best of their knowledge.
(3) If no information or explanation is furnished to the Registrar within the time specified under sub-section (1) or if the Registrar on an examination of the documents furnished is of the opinion that the information or explanation furnished is inadequate or if the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose a full and fair statement of the information required, he may, by another written notice, call on the company to produce for his inspection such further books of account, books, papers and explanations as he may require at such place and at such time as he may specify in the notice:
Provided that before any notice is served under this subsection, the Registrar shall record his reasons in writing for issuing such notice.
(4) If the Registrar is satisfied on the basis of information available with or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act or if the grievances of investors are not being addressed, the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard:
Provided that the Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this subsection:
Provided further that where business of a company has been or is being carried on for a fraudulent or unlawful purpose, every officer of the company who is in default shall be punishable for fraud in the manner as provided in section 447.
(5) Without prejudice to the foregoing provisions of this section, the Central Government may, if it is satisfied that the circumstances so warrant, direct inspection of books and papers of a company by an inspector appointed by it for the purpose.
(6) The Central Government may, having regard to the circumstances by general or special order, authorize any statutory authority to carry out the inspection of books of account of a company or class of companies.
Punishment for violation of Section 206 of Companies Act 2013 regarding information and inspection of books
(7) If a company fails to furnish any information or explanation or produce any document required under this section, the company and every officer of the company, who is in default shall be punishable with a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additional fine which may extend to five hundred rupees for every day after the first during which the failure continues.