Oppression and Mismanagement under Sections 241–242: A Shareholder’s Guide to NCLT and NCLAT Remedies

A shareholder who is being squeezed out of a company he helped build has one distinctive statutory weapon: the remedy for Oppression and Mismanagement under Sections 241 242 of the Companies Act, 2013. It is not a general-purpose grievance jurisdiction, and it is not a substitute for a civil suit. It exists for a narrow but serious situation — where the company’s affairs are being run in a manner oppressive to a member or prejudicial to the company, and where winding the company up would be justified but would punish the very person complaining. Understanding that shape is what separates a petition that survives to a hearing from one dismissed at the threshold.

What the Sections Actually Say?

Section 241 — Who May Complain, and of What

A member may apply where he complains that the affairs of the company “have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company”, or that a material change in the management or control of the company is likely to have that effect — provided he has a right to apply under s.244. The Central Government has its own independent power to apply where it is of opinion that the affairs are being conducted in a manner prejudicial to public interest (s.241(2)), and, since the 2019 amendments, a separate power to refer to the Tribunal the question whether a person is a “fit and proper person” to hold office as a director or key managerial person (ss.241(3)–(5)).

Two things follow from the drafting. First, the complaint may be of conduct prejudicial to the company, not only to the complainant — so a minority shareholder may raise value-destroying conduct that harms everyone. Second, the words “have been or are being conducted” have long been read to require something continuing, not merely a completed historical wrong.

Section 242 — The Twin Finding and the Tribunal’s Powers

The Tribunal may act if it is of opinion “(a) that the company’s affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or… to the interests of the company; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up”. Both limbs must be satisfied. It may then, “with a view to bringing to an end the matters complained of, make such order as it thinks fit”.

The illustrative list in s.242(2) runs from regulation of the conduct of the company’s affairs in future, through the purchase of shares by other members or by the company itself and the consequent reduction of capital, restrictions on transfer or allotment, termination or modification of agreements with a managing director, manager or director, setting aside transactions that would amount to a fraudulent preference in a winding up, removal of the managing director or a director, recovery of undue gains, the manner of fresh appointments, and appointment of directors who report to the Tribunal — ending with the sweeping clause “(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made”. Interim orders are expressly available (s.242(4)).

Section 244 — The Threshold, and its Waiver

In a company having a share capital, the application must come from not less than 100 members, or not less than one-tenth of the total number of members, whichever is less, or from members holding not less than one-tenth of the issued share capital, with all calls and other sums due on their shares paid. In a company without share capital, one-fifth of the members. Joint holders count as one member. The proviso is the escape valve: “the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241.”

The leading exposition of how waiver is to be approached remains the appellate tribunal’s decision in Cyrus Investments (P) Ltd. v. Tata Sons Ltd., 2017 SCC OnLine NCLAT 261: such an order, “being judicial in nature, cannot be passed by Tribunal, in a capricious or arbitrary manner and can be passed only by a speaking and reasoned order after notice”, and the Tribunal must satisfy itself whether “the proposed application under Section 241 merits consideration” and whether the allegations really pertain to oppression and mismanagement — without deciding the merits before waiver is granted. The jurisdiction is used: in Manoj Bathla v. Vishwanath Bathla (NCLAT, 30 April 2019) waiver was granted to a member whose holding had allegedly been reduced to a fraction of a per cent by forged transfers — the very manoeuvre the threshold would otherwise have rewarded.

Sections 245 and 246 — The Neighbours

Section 245 provides a distinct class action, available to members and depositors, with remedies including restraining ultra vires acts, declaring a resolution void where it was obtained by suppression or misstatement, and damages against the company, its directors, the auditor including the audit firm, and experts or advisers. It is not available against a banking company. Section 246 applies ss.337 to 341 — the winding-up provisions on delinquent officers and falsification — mutatis mutandis to proceedings under s.241 or s.245.

What “Oppression” Means?

The statute does not define it, and the Supreme Court has consistently declined to reduce it to a formula. In Shanti Prasad Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535, the Court approved the English line — Scottish Co-operative Wholesale Society v. Meyer, Elder v. Elder & Watson, Re H.R. Harmer — identifying the core element as a lack of probity and fair dealing in the affairs of a company to the prejudice of some portion of its members, and held that whether it exists must be examined case by case.

The most quoted modern statement is in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 3 SCC 333, where the Court held that “an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention… But a series of illegal acts upon one another can… lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression”. In the same judgment the Court set the outer boundary: “an unwise, inefficient or careless conduct of a Director… cannot give rise to a claim for relief”, and the complainant “must show that he has been constrained to submit to a conduct which lacks in probity”.

Two recurring fact-patterns have attracted particular attention. Share issues used to shift control are closely scrutinised: in Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan, (2005) 1 SCC 212, the Court held that directors’ acts in a private company are to be tested on a much finer scale, and that where a majority shareholder is reduced to a minority by a mala fide act of the company or its Board, that must ordinarily be considered an act of oppression. In Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314, an allotment was set aside where the surrounding circumstances were seriously suspect and did not satisfy the required standards of proof.

The Limits of the Jurisdiction — and Why They Matter

The jurisdiction over oppression and mismanagement under Sections 241–242 of the Companies Act, 2013, is not a general remedy for shareholder dissatisfaction or every dispute concerning company management. To obtain relief, a petitioner must satisfy both statutory conditions under Section 242(1), including showing that the facts would justify winding up the company on just-and-equitable grounds, but that winding up would unfairly prejudice the affected members.

Hanuman Prasad Bagri v. Bagress Cereals (P) Ltd., (2001) 4 SCC 420, is the authority for treating the just-and-equitable limb as a genuine precondition rather than a formality: the petitioner must establish both grounds for a just and equitable winding up and that winding up would unfairly prejudice him. Mere ouster from management by a lawful majority, where alternative civil remedies exist, does not open the door. Hind Overseas (P) Ltd. v. Raghunath Prasad Jhunjhunwalla, (1976) 3 SCC 259, adds that the just and equitable clause “baffles a precise definition” and rests on judicial discretion, and that a company, however small or domestic, is not for that reason a quasi-partnership — a point often assumed away in petitions drafted for closely held companies.

The most important recent statement of restraint is Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd., (2021) 9 SCC 449. The Court held that the closing words of s.242(1) “cannot be interpreted as conferring on the Tribunal any implied power of directing reinstatement”, and that the appellate tribunal had “granted the relief of reinstatement gratis without any foundation in pleadings, without any prayer and without any basis in law”. On the object of the jurisdiction it observed that its purpose “is to bring to an end the matters complained of by providing a solution. The object cannot be to provide a remedy worse than the disease” — and warned against taking the remedy “to the other extreme where the tail can wag the dog”.

Finally, the jurisdiction is not a shortcut around the civil court. In Aruna Oswal v. Pankaj Oswal (Supreme Court, 6 July 2020), a claim resting on inheritance and title to shares was held to be eminently a civil dispute, for the civil court in the pending partition suit, and the oppression proceedings were stayed.

The Counter-Current: How Wide is the Tribunal’s Reach?

Against that restraint sits an important 2025 decision. In Mrs. Shailja Krishna v. Satori Global Ltd., 2025 INSC 1065 (2 September 2025), the Supreme Court held that the Tribunal and the appellate tribunal “possess a wide jurisdiction to decide all such matters that are incidental and/or integral to the complaint alleging oppression and mismanagement”. The Tribunal was therefore not barred from ruling on a disputed gift deed said to have been procured by fraud or coercion, and it was wrong to relegate the petitioner to a civil suit under the Specific Relief Act. On the merits, board meetings held without notice and without quorum, together with a suspect share transfer, “collectively taken… in serial fashion demonstrate clear oppression and mismanagement”.

Read together, Aruna Oswal and Shailja Krishna mark out a boundary rather than a contradiction. Where the title question is the dispute, and the company petition is a device to litigate a family inheritance, the civil court is the forum. Where the impugned transfer is the instrument by which the oppression was carried out, the Tribunal may decide it as incidental to the complaint. Practitioners on both sides should expect this line to be fought over.

Procedure, in Outline

The limitation period for an NCLAT appeal against an NCLT order in oppression and mismanagement proceedings under Sections 241–242 of the Companies Act, 2013, is strictly enforced. In Bengal Chemists & Druggists Association v. Kalyan Chowdhury, (2018) 3 SCC 41, the Supreme Court held that the 45-day appeal period under Section 421(3) and the additional 45-day extension are “peremptory and mandatory in nature”. No further extension is permissible. Accordingly, an appeal filed beyond the maximum 90-day period is time-barred, irrespective of the merits of the case.

Frequently asked questions

How many shares do I need to file?

At least 100 members, or one-tenth of the members, whichever is less, or members holding one-tenth of the issued share capital, with all calls paid; one-fifth of the members where there is no share capital. The Tribunal may waive all or any of these requirements.

Can a removed director be reinstated?

No. The Supreme Court held in the Tata Consultancy Services litigation that s.242(1) confers no implied power of reinstatement, and that granting it without pleadings or prayer was without basis in law.

Is bad management oppression?

No. Unwise, inefficient or careless conduct of a director does not found a claim, and an isolated illegal act does not by itself prove oppression — though a series of connected illegal acts may. The complainant must show conduct lacking in probity.

How long is the appeal window?

Forty-five days from when the copy is made available, extendable by not more than a further forty-five. Both limits are mandatory and no further time can be granted.

Can the Tribunal decide title to shares?

Where the title dispute is the whole case — an inheritance claim, for instance — it belongs to the civil court. Where the impugned transfer is the very instrument of the oppression, the Tribunal may decide it as incidental to the petition.

Glossary

• Oppression — conduct in the affairs of the company lacking in probity and fair dealing, to the prejudice of some members; deliberately undefined by statute.
• Just and equitable winding up — the ground on which a court may wind up a company for reasons outside the specific statutory grounds; here, a precondition to relief.
• Waiver under s.244 — a judicial order relieving an applicant of the membership or shareholding threshold so that the petition may be entertained.
• Quasi-partnership — a company run on the mutual trust and participation of a small group; not to be assumed merely because a company is closely held.
• Fraudulent preference — a transaction favouring one creditor or party which, in a winding up, could be set aside; expressly reachable under s.242(2)(f).

Related Reading

• Oppression and mismanagement under sections 241–242 (this guide)
• Section 244 Waiver: How a Shareholder Below the 10% Threshold Gets Into the NCLT
• NCLAT Appeal Limitation: The 45-Day Clock, the Certified Copy, and What Can Actually Be Challenged
• Section 245 Class Action: The Lower-Threshold Route for Shareholders and Depositors
• Class Action or Derivative Action in Indian Company Law? Who Owns the Claim When the Wrong Is Done to the Company

Sources

1. Companies Act, 2013, ss.241, 242, 244, 245, 246 and 421.
2. Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd., (2021) 9 SCC 449 : 2021 SCC OnLine SC 272 (Supreme Court, 26 March 2021).
3. Mrs. Shailja Krishna v. Satori Global Ltd., 2025 INSC 1065 (Supreme Court, 2 September 2025) — judgment.
4. Shanti Prasad Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535 : (1965) 2 SCR 720 (14 January 1965).
5. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 3 SCC 333 (7 May 1981).
6. Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan, (2005) 1 SCC 212 (13 September 2004).
7. Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314 (20 January 2005).
8. Hanuman Prasad Bagri v. Bagress Cereals (P) Ltd., (2001) 4 SCC 420 (27 March 2001).
9. Hind Overseas (P) Ltd. v. Raghunath Prasad Jhunjhunwalla, (1976) 3 SCC 259.
10. Aruna Oswal v. Pankaj Oswal (Supreme Court, 6 July 2020).
11. Cyrus Investments (P) Ltd. v. Tata Sons Ltd., 2017 SCC OnLine NCLAT 261 (21 September 2017); Manoj Bathla v. Vishwanath Bathla, Company Appeal (AT) No. 399 of 2018 (NCLAT, 30 April 2019).
12. Bengal Chemists & Druggists Association v. Kalyan Chowdhury, (2018) 3 SCC 41 (Supreme Court, 2 February 2018).