Brief Overview:
Even if the members of a company do not meet the threshold eligibility criteria prescribed under Section 244 of Companies Act, 2013 (“Companies Act”) for initiating oppression and mismanagement proceedings (“O&M”) proceedings, the only remedy is to approach Hon’ble National Company Law Tribunal (“NCLT”) for seeking waiver of threshold.
It cannot be presumed that if a member of a company was to approach NCLT, seeking waiver of threshold, such an application would necessarily be rejected. A suit cannot be entertained in view of the bar on jurisdiction of Civil Court under Section 430 of Companies Act, on mere speculation.
[Suraj Prakash Arora and Ors. v. Roshanara Club Ltd. and Ors., (CS(OS) 210/2025 and I.A. 8546/2025); Order dated 15th April 2025 passed by Delhi High Court]
Technical Details:
1) In the present case, certain members of Roshanara Club Ltd. (“RCL”) filed a Suit seeking reliefs against the oppression, misfeasance and mismanagement of the affairs of RCL.
2) The Suit was filed as the members did not meet the threshold eligibility criteria under Section 244 of Companies Act required for the purpose of initiating O&M proceedings before the NCLT.
3) The Hon’ble Delhi High Court (“Hon’ble Court”) held that first remedy is to apply before NCLT under Section 241 of Companies Act and seek a waiver under the proviso to Section 244 of Companies Act.
4) Further if the request for waiver is declined, an appeal could be preferred under Section 421 of Companies Act before Hon’ble National Company Law Appellate Tribunal (“NCLAT”).
5) It is a settled law that jurisdiction of a Civil Court in matters pertaining to allegations of O&M falling in the domain of NCLT are barred under Section 430 of Companies Act. The Hon’ble Court held that the contention that precedents reflect that NCLT ordinarily or invariably declines to grant waiver can be no argument in the teeth of a statutory provision.
6) One cannot pre-judge the outcome of an application for waiver, and this cannot be a yardstick to decide the maintainability of the Suit, which cannot be entertained in view of the bar under Section 430 of Companies Act.
JC Takeaway:
The present judgement clarifies that even in circumstances when the statutory threshold for initiating O&M proceedings is not met, no alternative forums can be approached. This leaves no room for forum shopping on part of the affected member of a Company bringing all the disputes under one roof.
For further details, please see:
Suraj Prakash Arora and Ors. v. Roshanara Club Ltd. and Ors.
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