Arbitrability Of Oppression, Mismanagement And Other Prejudice Claims In India

Sohini Bag, School of Law, Christ (Deemed to be) University, Bangalore

ABSTRACT

The famed Cyrus Mistry case1 scandal, which surfaced recently, has sparked discussion about corporate governance and the powers of the NCLT and NCLAT. The SC clarified that the main objective of the Tribunal is to bring an end to the matters complained by providing a solution and not put an end to the company itself along with forsaking the interests of other stakeholders, as stated in the legislation itself “with a view to bringing to an end the matters complained of.”2 Transparency is a key necessity to corporate governance, the absence of which leads to Oppression and Mismanagement in the Company. To protect the interests of shareholders, Chapter XVI has been incorporated in the Companies Act,2013 which lays down the law relating to Oppression and Mismanagement. The 2013 Act, also conducts prejudice to any member or prejudice to the public interest, or prejudice to the interest of the company, which are all added along with oppression. However, neither term, Oppression or Mismanagement, have been defined in the Companies Act 2013, thus the scope relies entirely on judicial interpretation. The term oppression is made out as where the conduct of the authority is harsh, burdensome, and wrongful and the action is against probity and good conduct. The circumstances and effects giving rise to mismanagement have been specified under section 241(1)(b) of the Companies Act, 2013. For the petition under this section to succeed, it must be established that the affairs of the company are being conducted in a manner prejudicial to the interest of the company or public interest, or that, or by any change in the manner and control over the company and it is likely that the affairs of the company will be conducted in that manner. Under the new law the test of 'winding- up on just and equitable grounds' is applicable to mismanagement under the Companies Act, 2013.