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Presented by: CS NESAR AHMAD Tel: +91-11-2953 2342

Oppression and Mismanagement. Presented by: CS NESAR AHMAD Tel: +91-11-2953 2342 csnesar367@gmail.com Mob: +91-9810044367 ‘ Sankalp ’ C-227, Paryavaran Complex New Delhi-110 030. CONTENTS.

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Presented by: CS NESAR AHMAD Tel: +91-11-2953 2342

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  1. Oppression and Mismanagement Presented by: CS NESAR AHMAD Tel: +91-11-2953 2342 csnesar367@gmail.com Mob: +91-9810044367 ‘Sankalp’ C-227, Paryavaran Complex New Delhi-110 030

  2. CONTENTS • A comparative analysis of provisions of oppression & mismanagement under Companies Act 2013 (‘2013 Act’) & Companies Act 1956 (‘1956 Act’). • NCLT/NCLAT constitution & CLB dissolution – Critical issues in transition of matters related to oppression and mismanagement. • Rules of prevention of oppression & mismanagement under 2013 Act , Chapter –XVI . • Practical and procedural aspects of drafting, art of pleading and court craft. • Landmark judgments and principles evolved on oppression & mismanagement .

  3. Comparison of provisions of oppression & mismanagement under both Acts . Co Act 2013 Co Act 1956

  4. COMPARATIVE ANALYSIS • SECTION 241 OF THE 2013 ACT : CORRESPONDING TO SECTIONS 397, 398, 401,402, 403, & 404 OF 1956 ACT • SECTION 241 OF THE 2013 ACT: APPLICATION TO TRIBUNAL • Under the 1956 Act, the CLB was empowered to grant relief against oppression and mismanagement . The 2013 Act has transferred these functions to NCLT & NCLAT. • The 1956 Act did not cover past aspects of oppression but acts oppression that have happened in the past and the same are continuing till the date of filing petition. The 2013 Act in Section 1( Part A) expanded the scope of agitating past concluded actions.

  5. COMPARATIVE ANALYSIS • Under the 2013 Act, members can seek relief against conduct of affairs in a manner prejudicial to public interest or oppressive to him or any member or members or prejudicial to the interests of the company even though it may not amount to oppression. This was combined in S. 397 & 398 under 1956 Act. • SECTION 242 OF THE 2013 ACT: POWERS OF TRIBUNAL • The illustrative list of reliefs by NCLT under S. 242 (sub-section (2)], ) have been enlarged in comparison in to S. 402 of 1956 Act.

  6. COMPARATIVE ANALYSIS • SECTION 244 OF THE 2013 ACT : CORRESPONDING TO SECTIONS 399 OF 1956 ACT • SECTION 244 OF THE 2013 ACT: RIGHT TO APPLY UNDER S. 241 • S. 399 of the 1956 Act provide that the Central Government may waive any of the conditions (regarding minimum number of members should apply) . However, under the 2013 Act , power to waive compliance with provisions of S. 244 of the 2013 Act is with the NCLT (Cyrus Investments Pvt. Ltd. and Ors Vs. Tata Sons Ltd. and Ors.)

  7. COMPARATIVE ANALYSIS • SECTION 245 OF THE 2013 ACT: CLASS ACTION • It is a new provision wherein it permits class action by members or depositors against company, its directors and auditors, expert or advisor or consultant or any other person for damages and compensation or any fraudulent, unlawful or wrongful act or conduct . • Application for class action suit has to be filed before the NCLT (Read with Notification issued by MCA on 08.05.2019)

  8. TRANSITION OF MATTERS TO NCLT AND CRITICAL ISSUES.

  9. TRANSITIONAL ISSUES • With respect to the notification dated June 1, 2016 forming NCLT, various sections of the Companies Act 2013 (which have reference to NCLT are made effective.  • The clause (b) of Sec. 242(1) and clause (c) & (g) of Sec. 242(2) including sections 337 to 341 of Companies Act 2013 (relating to powers of NCLT) has since been notified w.e.f 09.09.2016. The said clause(s) contains a reference to order of winding-up on just and equitable grounds , in case of purchase of shares or interests of any member of the company, order of reduction of it’s share capital and setting aside certain acts of company within 3 months before the date of application and also application to Tribunal by the aggrieved person or frauds by officers, non-maintenance of books of account, fraudulent conduct of business and damages against delinquent directors/partners.

  10. RULES • RULES OF PREVENTION OF OPPRESSION & MISMANAGEMENT UNDER 2013 ACT (‘Act’) , CHAPTER –XVI . • Salient features of the rules are as under- • Number of members who can file an application for class action. • Publication of notice : For the admission of the class action application filed under sub-section (1) of section 245, a public notice shall be issued by NCLT , to all the members of the class

  11. RULES • RULES OF PREVENTION OF OPPRESSION & MISMANAGEMENT UNDER 2013 ACT , CHAPTER –XVI . • Application under clause (a) or clause (b) of sub-section (1) of section 241 of the Act shall not be withdrawn without the leave of the NCLT. • Serving copy of every such application under clause (a) or clause (b) of sub-section (1) of section 241 of the Act to concerned company and Regional Director or such other person as may be directed by NCLT.

  12. RULES • RULES OF PREVENTION OF OPPRESSION & MISMANAGEMENT UNDER 2013 ACT , CHAPTER –XVI . • Where an order made by the NCLT on a petition under this Chapter involves a reduction of share capital or alteration of the memorandum of association, the provisions of the Act and rules relating to such matters shall apply as the NCLT may direct. • The Tribunal shall give notice of every application made to it under section 241 or 245 to the Central Government and shall take into consideration the representations, if any, made to it by that Government before passing a final order under those sections.

  13. PRACTICAL AND PROCEDURAL ASPECTS OF DRAFTING, ART OF PLEADING AND COURT CRAFT

  14. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 20: PROCEDURE • Every Appeal/ petition/ application / caveat petition or objection or counter presented to the Tribunal shall be in English in case it is in some other Indian language, it shall be accompanied by a copy translated in English. • Shall be fairly and legibly type written, lithographed or printed in double spacing on one side of standard petition paper with an inner margin of about four centimetre width on top and with a right margin of 2.5. cm, and left margin of 5 cm, duly paginated, indexed and stitched together in paper book form.

  15. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 20: PROCEDURE • The cause title shall state “Before the National Company Law Tribunal” and shall specify the Bench to which it is presented and also set out the proceedings or order of the authority against which it is preferred. • shall be divided into paragraphs and shall be numbered consecutively. • Full name, parentage, age, description of each party and address and in case a party sues or being sued in a representative character, shall also be set out at the beginning.

  16. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 21: PARTICULARS TO BE SET OUT IN THE ADDRESS FOR SERVICE • The address for service of summons shall contain: • the name of the road, street, lane and Municipal Division or Ward, Municipal Door and other number of the house; • the name of the town or village; • the post office, postal district and PIN Code, and • any other particulars necessary to locate and identify the addressee such as fax number, mobile number, valid e-mail address, if any

  17. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 22: INITIALLING ALTERATION • Every interlineations, eraser or correction or deletion in any appeal or petition or application or document shall be initialled by the party or his authorised representative presenting it.

  18. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 23: PRESENTATION OF PETITION OR APPEAL • Every petition, application, caveat, interlocutory application, documents and appeal shall be presented in triplicate by the appellant or applicant or petitioner or respondent, as the case may be, in person or by his duly authorised representative or by an advocate duly appointed in this behalf in the prescribed form with stipulated fee at the filing counter and non-compliance of this may constitute a valid ground to refuse to entertain the same. • All the documents filed in the Tribunal shall be accompanied by an index in triplicate containing their details and the amount of fee paid thereon.

  19. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 23: PRESENTATION OF PETITION OR APPEAL • Sufficient number of copies of the appeal or petition or application shall also be filed for service on the opposite party. • All the documents filed in the Tribunal shall be accompanied by an index in triplicate containing their details and the amount of fee paid thereon. • Sufficient number of copies of the appeal or petition or application shall also be filed for service on the opposite party. • The processing fee prescribed by these rules, with required number of envelopes of sufficient size and notice forms shall be filled along with memorandum of appeal.

  20. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 24: NUMBER OF COPIES TO BE FILED • The appellant or petitioner or applicant or respondent shall file three authenticated copies of appeal or petition or application or counter or objections, as the case may be, and shall deliver one copy to each of the opposite party.

  21. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • Rule 25: LODGING OF CAVEAT • Any person may lodge a caveat in triplicate in any appeal or petition or application that may be instituted before this Tribunal by paying the prescribed fee after forwarding a copy by registered post or serving the same on the expected petitioner or appellant. • The caveat shall remain valid for a period of ninety days from the date of its filing.

  22. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 26: ENDORSEMENT AND VERIFICATION • At the foot of every petition or appeal or pleading there shall appear the name and signature of the authorised representative. • Every petition or appeal shall be signed and verified by the party concerned in the manner provided by these rules.

  23. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 27: TRANSLATION OF DOCUMENT • A document other than English language intended to be used in any proceeding before the Tribunal shall be received by the Registry accompanied by a copy in English • Shall be agreed to by both the parties or certified to be a true translated copy by authorised representative engaged on behalf of parties in the case • Appeal or petition or other proceeding shall not be set down for hearing until and unless all parties confirm that all the documents filed on which they intend to rely are in English or have been translated into English and required number of copies are filed into Tribunal.

  24. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 28: ENDORSEMENT AND SCRUTINY OF PETITION OR APPEAL OR DOCUMENT • The person in charge of the filing counter shall immediately on receipt of petition or appeal or application or document affix the date stamp of Tribunal thereon and also on the additional copies of the index and return the acknowledgement to the party • Any defect in such document shall be rectified within seven days from the date of return by the person in charge • Where the defects are not rectified within the prescribed time, the Registrar may, for reasons to be recorded in writing, decline to register the pleading or document.

  25. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 29: REGISTRATION OF PROCEEDINGS ADMITTED • On admission of appeal or petition or caveat or application, the same shall be numbered and registered in the appropriate register maintained in this behalf and its number shall be entered therein.

  26. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 30: CALLING FOR RECORDS • On the admission of appeal or petition or application the Registrar shall, if so directed by the Tribunal, call for the records relating to the proceedings from any adjudicating authority and retransmit the same.

  27. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 31: PRODUCTION OF AUTHORISATION FOR AND ON BEHALF OF AN ASSOCIATION • Where an appeal or application or petition or other proceeding purported to be instituted by or on behalf of an association, the person or persons who sign (s) or verify (ies) the same shall produce along with such application, for verification by the Registry, a true copy of the resolution of the association empowering such person(s) to do so: • Provided that the Registrar may at any time call upon the party to produce such further materials as he deems fit for satisfying himself about due authorization: • Provided further that it shall set out the list of members for whose benefit the proceedings are instituted.

  28. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 32:INTERLOCUTORY APPLICATIONS • Every Interlocutory application for stay, direction, condonation of delay, exemption from production of copy of order appealed against or extension of time prayed for in pending matters shall be in prescribed form and the requirements prescribed in that behalf shall be complied with by the applicant, besides filing an affidavit supporting the application.

  29. NCLT Rules, 2016 (PART III) • INSTITUTION OF PROCEEDINGS, PETITION, APPEALS ETC. • RULE 33:Procedure on production of defaced, torn or damaged documents • When a document produced along with any pleading appears to be defaced, torn, or in any way damaged or otherwise its condition or appearance requires special notice, a mention regarding its condition and appearance shall be made by the party producing the same in the Index of such a pleading and the same shall be verified and initialled by the officer authorized to receive the same.

  30. Appearance, Art of Advocacy & Court Craft

  31. Appearance, Art of Advocacy & Court Craft • Appearance • Section 432 of the Act authorises the party to any proceeding or appeal to appear in person or through CA, CS, CMA or legal practitioner.

  32. Appearance, Art of Advocacy & Court Craft Art of Advocacy & Court Craft Preparing a case, knowing the law and the precedents are not sufficient to present the case before the Tribunal. This requires a lot of human skills apart from technical and procedural skills. Some of the key points to be considered while appearing & pleading the case before Tribunal. Leaving a good impression : Remember that you are always being observed.

  33. Appearance, Art of Advocacy & Court Craft Art of Advocacy & Court Craft 2. Observe mannerism : Be polite but firm in your conduct. 3. Be on time & well prepared : Reach early so there is time to speak to opposing counsel for a last minute resolution . The court appreciates orderly conduct which creates a long lasting impression. 4.Be friendly to the opposing counsel: Introduce yourself to opposing counsel and initiate a small conversation.

  34. Appearance, Art of Advocacy & Court Craft Art of Advocacy & Court Craft 5.Keep your client informed : Talk to your client in language they understand. A well-informed client seems to be a much more settled client. 6. Know your audience: Every Tribunal is different. Therefore, tailor your advocacy style to suit the forum. Service of documents: While tendering documents/ citations to Tribunal, ensure to have enough copies to circulate to other side.

  35. Appearance, Art of Advocacy & Court Craft Art of Advocacy & Court Craft 8. Believe in Submission: Regardless of the case, believe in your submissions. Tribunal observes when there is a half hearted submission. 9. Be clear & slow:  Speak slowly and clearly because the Presiding member generally takes notes. 10. Be honest with the Tribunal: About your case and timeframes.

  36. 11. Last-minute basics: • Turn your phone to silent • Face the bench and bow from the waist whenever you enter or leave a sitting courtroom. • Have the phone numbers of all of the persons connected with the case including opposing counsel. • Stand when addressing the court. ART OF ADVOCACY & COURT CRAFTS

  37. State brief facts of the case. • Formulate issues/points. • Take each point and state relevant facts. • Submit a list of citations to the Tribunal & hand over the Xerox copies of binding decisions to the Court Master/opposing counsel. ART OF ADVOCACY & COURT CRAFTS

  38. Practical & Procedural Aspects Of Drafting Petition /Pleading

  39. KNOWING THE LEGAL MAXIMS Ubi jus ibi remedium: No right without remedy Stare decisis : To stand by decisions (precedents) Ratio decidendi: Reason for deciding Audi alteram partem: Hear the other side Nemo debet esse judex in propria causa: No one can be a judge in his own cause.  Volenti non fit injuria: An injury is not done to one that consents to it. Verbatim : Word by word, exactly.

  40. KNOWING THE LEGAL NOMENCLATURE PETITION / APPLICATION PETITIONER/APPLICANT RESPONDENT REPLY REJOINDER PETITIONER/APPLICANT SUR-REJOINDER (WITH PERMISSION OF COURT) RESPONDENT

  41. PREPARATORY POINTS Take minute facts from the client. Lend your complete ears to the client. Put question to the client. Convey to the client about exact legal position. Give correct picture of judicial views.

  42. DRAFTING OF PLEADINGS Quote relevant provisions in the petition. Do not suppress facts. Highlights material facts, legal provisions and Court decisions, if any. State important points together with reference.

  43. PROFESSIONAL ETIQUETTES 1. Dressing Etiquettes Navy Blue suit and white shirt. Saree or any other dress of a sober colour with a Navy Blue jacket. 2. Handshake Etiquettes 3. Communication Etiquettes

  44. CONDUCT AND ETIQUETTE DUTY TO THE TRIBUNAL - Conduct yourself with dignity and self-respect. DUTY TO CLIENT - Don’t withdraw from engagements once accepted, without sufficient cause. DUTY TO OPPONENT - Do your best to carry out promises made to the opposite-party.

  45. TIME MANAGEMENT 1. Being busy isn’t the same as being effective. 2. Spend more time on specific activities. 3. Use your free time wisely. 4. Attempt the assignment on priority basis.

  46. MYTHS • Only lawyers can draft. • I have been practicing as a Company Secretary for 10-20 years. It’s difficult to venture into a new arena. • Drafting is a burden. • I have not studied the subject(s).

  47. HISTORIC COURT DECISIONS

  48. NOTEWORTHY RULINGS Some of the principles evolved over the years by historical judgements delivered by Apex Court on oppression and mismanagement are : Shanti Prasad Jain Versus Kalinga Tubes Limited In the present case , the major point of dispute raised by Appellant i.e. Shanti Prasad Jain is that the affairs of the Company were being conducted in a manner oppressive to him and his group of members. The scope of the Section 397 of Companies Act 1956 (‘Act’) is wel well explained by SC in the present case Contd...

  49. NOTEWORTHY RULINGS • Court held, undoubtedly, there has to be a oppressive conduct of the majority shareholders over minority .However , acts of oppression must be continuous acts on the part of the majority shareholders, continuing up to the date of petition. • Mere lack of confidence b/w shareholders is not enough , unless oppression of a minority involves lack of an element of fair dealing to a minority member in the matter of his proprietary rights as a shareholder.

  50. NOTEWORTHY RULINGS • Sangramsinh P. Gaekwad & Ors. Vs Shantadevi P. Gaekwad • In the present case, dispute was regarding issue of additional shares and issues concerning fiduciary duties of directors. • Apex Court while interpreting S. 397 read with S. 402 of Act and principles governing jurisdiction of court , observed that • There are wide powers to the court while exercising jurisdiction under S 402, but it is not in all cases that relief can be provided. Relief must be provided depending upon exigencies of the situation. • Contd...

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