Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
The law governing corporates or
the companies should be clear and there should be an "effective redressel
mechanism". A lot actually has been done to address the issue of
"effective and speedy corporate dispute redressel" by constituting
Company Law Board and now mooting to establish a National Company Law Tribunal
and National Company Law Appellate Tribunal.
Looking at the manner in which a
winding-up petition is being adjudicated given the complications and
limitations by the High Court or the Company Court, and looking at the manner
in which the petitions under section 397/398 of the Companies Act, 1956, are
being dealtwith by the Company Law Board now, I feel that the High Court or the
Company Court provides effective and speedy reddressel. Liquidation is a
complicated affair and we know the functioning of the office of Official
Liquidator and the difficulties. Liquidation is a very complicated affair and
it is not like exercising powers by the Company Law Board under section 397/398
of the Companies Act, 1956. There can be many reasons for this and many of the
orders or the directions of the Company Court are being implemented without
much difficulty. The High Court and the Supreme Court, being the constitutional
courts, can interpret law and the interpretation becomes law binding on all the
courts and tribunals in India and indirectly it binds all the citizens and
entities.
Section 397/398 of the Companies Act, 1956 confers a very valuable right and redressel to the shareholders of the Company and especially for minority shareholders against oppression and mismanagement. The sections as referred to basically meant to provide preventive measures preventing the continuous acts of oppression and mismanagement. While preventing the majority in the company in committing the acts of oppression and mismanagement, the Company Law Board, under section 397/398, will certainly look into the validity of certain acts of the Company and will set-aside those. The Company Law Board can set-aside the illegal allotment of shares, declare the appointment of a director etc. as illegal and do all such acts as provided specifically under section 397/398 and also under section 402 of the Companies Act, 1956.
Section 397/398 of the Companies Act, 1956 confers a very valuable right and redressel to the shareholders of the Company and especially for minority shareholders against oppression and mismanagement. The sections as referred to basically meant to provide preventive measures preventing the continuous acts of oppression and mismanagement. While preventing the majority in the company in committing the acts of oppression and mismanagement, the Company Law Board, under section 397/398, will certainly look into the validity of certain acts of the Company and will set-aside those. The Company Law Board can set-aside the illegal allotment of shares, declare the appointment of a director etc. as illegal and do all such acts as provided specifically under section 397/398 and also under section 402 of the Companies Act, 1956.
There can be an agreement,
contract or a transaction between the Company and a third party. Its true that
an agreement, contract or a transaction can give rise to a shareholder to
allege mismanagement of funds and he can seek for the prevention of future
mismanagement. But, how to get those illegal agreements, contracts or charges
etc. to be set-aside.? If Company Law Board has no power to set-aside illegal
agreements, contracts or the charges, then, obviously one has to go to Civil
Court challenging those transactions. But, what happens if the Company Law
Board entertains the prayer initially and disposes of the matter after few
years stating that the Company Law Board has no power to deal with a particular
transaction entered into between the Company and a third party. There will be
issues of law of limitation and also equity will come and the disposal of a
Civil dispute will take few years as everybody knows. These issues have
troubled many companies and many companies and the shareholders are still being
troubled with the ambiguous situation the powers of Company Law Board to deal
with transactions, contracts and the agreements etc.
Even in the proposed companies
bill, there is no reference on the issue under discussion though there is a
specific reference to the jurisdiction of Civil Court and there is a specific
bar.
It is also true that many facts
are to be taken into consideration while the Company Law Board exercises its
power under section 397/398 of the Companies Act, 1956.
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
