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
