Published On: March 9th 2026
Authored By: Chandana Penumacha
VIT AP University
Introduction:
Majority rule is the foundation of both corporate and sovereign democracy. By promoting group decision-making over individual interests, this majority-driven strategy establishes a contractual agreement among shareholders. Efficiency is improved by giving the board of directors’ authority over corporate decisions. Nonetheless, there is a chance that the majority may marginalize and control minority stockholders. Company law[1] intervenes to control the activities of powerful shareholders and make sure they don’t unjustly hurt the minority in to stop this. To preserve a just distribution of power, minority shareholders have access to legal remedies, such as allegations of mismanagement, discrimination, and persecution.
In light of this, this article aims to analyse the shareholder remedies for oppression and mismanagement under the 2013 Act. The law has made some significant changes, although it mostly mirrors sections 397 and 398 of the Companies Act, 1956 (the “1956 Act”). In many respects, the 2013 Act both limits and broadens shareholder remedies.
Research question:
What challenges do petition shareholders face while seeking relief for corporate oppression or mismanagement?
Corporate governance:
The structure that controls how companies are operated is known as corporate governance. The structures and interactions that are the focus of this study include those between management, the board of directors, auditors, shareholders, creditors, and other stakeholders. Corporate governance encompasses the processes in place to achieve and monitor the company’s objectives as well as the frameworks used to identify those objectives. The International Federation of Accountants, or IFAC, recently defined “enterprise governance.”
The 2013[2] Act’s Section 241(1) governs conduct, penalties, and the Tribunal’s application for remedies in cases of oppression, etc. __ (1) Any employee of a firm who expresses concerns that
- The company’s operations have been or are being conducted in a way that is detrimental to the public’s interests, oppressive or unjust to him or any other member, or detrimental to the company’s interests.
- There has been a major shift in the company’s management or control that was not initiated by or in the best interests of any creditors, including debt holders or any class of shareholders. This could be brought about by changes in the management, ownership of the company’s shares, the Board of Directors, or any other source.
Oppression & mismanagement:
Oppression under section 397 of the 1956 Act has been a cornerstone of shareholder remedies in India for more than 50 years. A significant corpus of jurisprudence has been produced by courts citing the English courts’ decisions about the statutory counterpart in section 210[3] of the English Companies Act of 1948. Sections 241 of the 2013 Act and 397 of the 1956 Act contain similar terminology that supports the full applicability of the previous jurisprudence to the current legislative framework.
The court in Elder v. Elder[4] & Watson stated which “the essence of the matter seems to be that the conduct complained of should, at the very least, involve a visible departure from the standards of fair dealing and a violation of the conditions of fair play on which every shareholder who entrusts their money to a company is entitled to rely.” It went on to say that “a simple lack of trust or a complete standstill does not qualify as oppression.” In [5]Scottish Co-operative Wholesale Society Ltd. v. Meyer, the House of Lords interpreted the word to mean “burdensome, harsh, and wrongful” behaviour, following the dictionary definition.
In [6]Power Finance Corporation Limited v. Shree Maheshwar Hydel Power Corporation Limited, however, the NCLAT provided a more restrictive interpretation, stating that the verb “have been” refers to the present perfect tense, meaning actions that began in the past and are still occurring today. Additionally, the distinction between “have been” and “had been,” which refers to past deeds and indicates the past perfect tense, was clarified. This semantic interpretation totally undermines the intended shift in language for the oppression remedy in Section 241 of the Companies Act.
Courts have been asked to determine whether the oppression remedy can be applied when petitioners are oppressed in their roles as members or shareholders, or when they are oppressed in other positions, such directors of the company. Generally speaking, courts have maintained that the petitioners had to have experienced the purported “oppression” while they were directors.
Despite the many interpretation challenges they have faced over the years, Indian courts have provided a great deal of clarity on the matter. As an illustration of this, the Supreme Court established standards in V.S. Krishnan v. West fort Hi-tech Hospital Ltd[7]. after reviewing several decisions.
It is evident from the aforementioned choices that tyranny would be evident:
- When the behaviour is severe, onerous, and improper.
- The immediate goal would give certain shareholders an advantage over the others in situations where the activities are malevolent and driven by a collateral goal in the best interests of the company.
- Probity and good conduct compromised.
- The alleged oppressive act may be entirely legal but still oppressive; therefore, the test of whether an action is oppressive is not based on its legality because, even if it is, Sections 397 and 398 would still consider it oppressive if it is otherwise against good conduct, probity, burdensome, harsh, or wrong, or if it is carried out dishonestly or for a secondary purpose.
When two requirements are satisfied, the mismanagement remedy can be used. The management of the company must first go through a major transition, which can happen in a number of ways, including ownership, management, or board changes (the reason). Second, this modification must cause the business to function in a way that is detrimental to the interests of the business or its shareholders. The mismanagement[8] remedy is broader than the oppression remedy, Both the language of section 241(1)(b) and the justification for include mismanagement as a particular remedy make this distinction evident.
Section 242(1) of the 2013 Act governs the just and equitable grounds:
The Tribunal’s authority If the Tribunal finds that the company’s operations have been or are being conducted in a way that is oppressive to one or more members or detrimental to the company’s interests, and that winding up the business would unfairly disadvantage such member or members, the facts would support the winding-up order because it was reasonable and fair to do so. In the past, the sole option available to shareholders hurt by the company’s or its dominant owners’ wrongdoing was to wind up the corporation on “just and equitable” grounds—often referred to as a “nuclear option” in contemporary language. However, as P.N. Bhagwati[9], J. noted, this remedy was wholly inadequate since it effectively necessitated the company’s dissolution in order to end oppression and poor management. Liquidating the company would be a fairly clear answer to these issues, which would eventually harm the interests of minority shareholders. The liquidation may result in the sale of the company’s assets for a break-up value, which could be insignificant.
Section 241(1)(a) of the 2013 Act[10] states that if petitioning shareholders can prove mismanagement, oppression, or prejudice in addition to the existence of grounds for a just and equitable winding up, the winding up would be deemed unfairly prejudicial to them if caused suffer. A court has the power to grant remedies for mismanagement, oppression, or prejudice once it has determined whether the petitioning shareholder is entitled to it. The 2013 Act’s section 242(1) gives the court wide jurisdiction to issue remedy “with a view to bringing to an end the matters complained of.[11]
This objective influences the kind of alleviation provided. A number of specific remedies that the court may grant are listed in Section 242(2). These remedies include stopping or altering agreements, permitting a shareholder or the company to purchase shares, and regulating the firm’s future operations.”The Court is not powerless to do substantial justice between the contesting parties; therefore, if the situation requires, it can order the purchase of shares from the minority group,” the Madras High Court ruled in M. Ethiraj[12], even in cases where the petitioner is unable to establish oppression. Even while the exit option is available regardless of whether oppression, bias, or mismanagement is established, courts must modify the specific remedial measures to meet the nature of the substantive conclusion.
Battle between Mr. Ratan Tata & Mr. Cyrus Mistry[13]:
The current structure for shareholder remedies is outlined in sections 241 and 242 of the Companies Act, 2013 (the “2013 Act”), however shareholder remedies have been a component of Indian company law since the mid-1900s. These provisions were put to the test in one of the most contentious commercial conflicts. On October 24, 2016, the board of Tata Sons Limited, the parent company of the well-known Tata group, removed Mr. Cyrus Mistry from his position as executive chairman. The Shapoorji Pallonji group, of which Mr. Mistry is a member, owns a minority interest in Tata Sons. In retaliation, the group then sued Tata Sons and its controlling owners under sections 241 and 242 of the 2013 Act, including two Tata trusts.
The Shapoorji Pallonji group challenged a number of Tata Sons decisions, including changes to the company’s articles of association to give shareholders more authority, a move to remove Mr. Mistry as executive chairman and then as a director of Tata Sons, and other business decisions made by Tata group companies (known as “legacy issues”). Following protracted hearings, the Mumbai Bench of the National Company Law Tribunal (NCLT) issued a 368-page decision that denied minority shareholders any form of relief.
The minority shareholders of Tata Sons, naturally upset with the NCLT’s decision, filed an appeal with the National Company Law Appellate Tribunal (NCLAT). In a landmark decision, the NCLAT determined that Mr. Cyrus Mistry’s expulsion as executive chairman by the board was unlawful and ordered his reinstatement. It also found the following actions unconstitutional, including the appointment of a new executive chairman. This overturned the NCLT’s previous decision, which found no evidence of harassment by the majority shareholders or the board and left the minority owners without remedy.
Following this, Tata Sons filed an appeal with the Supreme Court, delaying the NCLAT’s verdict. Unlike the NCLT, which thoroughly analysed the evolution of the law, the NCLAT did not properly consider the legal structure underpinning minority shareholder remedies in its ruling. The Supreme Court’s decision is expected to provide more specific directions on how to apply these remedies, particularly given how crucial this issue is to corporate India.
As the NCLAT noted in the Tata Sons case:
A study of sections 241 and 242 of the 2013 Act[14] can be reduced to two major questions:
- Do the business’s operations violate the public interest, oppress members, or impair the company’s interests?
- Will winding up the firm cause disproportionate injury to members, even if it is right and equitable in the circumstances?
Conclusion:
Under Indian company law, shareholder remedies are still centred on the provisions in sections 241 and 242 dealing with oppression, prejudice, and mismanagement. Anecdotal statistics show that petitioning shareholders use these remedies considerably more frequently than other shareholder remedies like as class actions and derivative actions. Legislative and judicial efforts have established the extent of these remedies for nearly 70 years[15], although there are still some problems. English law has been revised to reduce the harshness of the oppression remedy by adopting the concept of unfair prejudice and removing the conditional limb in order to create a stand-alone remedy.
References:
[1] Companies Act 1956, ss 397–398 (India).
[2] Companies Act 2013, ss 241–242 (India).
[3] Companies Act 1948, s 210 (UK).
[4] Elder v Elder & Watson Ltd [1952] SC 49 (Court of Session).
[5] Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 (HL).
[6] Power Finance Corporation Ltd v Shree Maheshwar Hydel Power Corporation Ltd (2017) NCLAT
[7] V S Krishnan v Westfort Hi-Tech Hospital Ltd (2008) 3 SCC 363.
[8] Arad Reisberg, ‘The Notion of Oppression and Unfair Prejudice in Corporate Law’ (2007) 28 Company Lawyer 301.
[9] P N Bhagwati J, observations on just and equitable winding up, Supreme Court of India.
[10] Sandeep Parekh, ‘Oppression and Mismanagement under the Companies Act 2013’ (2016) 3 IJCL 45.
[11] Umakanth Varottil, ‘Minority Shareholder Remedies and Corporate Governance in India’ (2013) 8 NLSIR 1.
[12] M Ethiraj v Managing Director, Sakthi Sugars Ltd AIR 2003 Mad 26.
[13] Cyrus Investments Pvt Ltd v Tata Sons Ltd (2020) SCC OnLine SC 272.
[14] Gower and Davies, Principles of Modern Company Law (10th edn, Sweet & Maxwell 2016).
[15] Gower and Davies, Principles of Modern Company Law (10th edn, Sweet & Maxwell 2016).
