{"id":21959,"date":"2023-04-19T15:54:47","date_gmt":"2023-04-19T10:24:47","guid":{"rendered":"https:\/\/gstguntur.com\/?p=21959"},"modified":"2023-04-19T15:54:47","modified_gmt":"2023-04-19T10:24:47","slug":"class-action-suits-cs-professional-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/class-action-suits-cs-professional-study-material\/","title":{"rendered":"Class Action Suits – CS Professional Study Material"},"content":{"rendered":"

Chapter 3 Class Action Suits – Resolution of Corporate Disputes Non Compliances & Remedies Notes<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Class Action Suits – Resolution of Corporate Disputes Non Compliances & Remedies Study Material<\/h2>\n

Question 1.
\nWrite short note on:
\nRule of Opt-out. (June 2022, 4 marks)<\/p>\n

Question 2.
\nWhat do you mean by Class Action Suit? Discuss with reference to eligibility criteria for class action, nature of relief and effect of Tribunal\u2019s order. (Dec 2017, 4 marks)
\nAnswer:
\nSection 245 of the Companies Act, 2013 makes provision for class action by investors. The term \u2018investors\u2019 include shareholders, deposit holders and any class of security holders of the company.<\/p>\n

Section 245 permits a representative of any class of investors to file a suit before the National Company Law Tribunal for relief.
\nIn terms of Section 245 (1), Such number of member or members, depositor or depositors or any class of them, as the case may be, as are indicated in sub-section (2) of the section may, if they are of the opinion that the management or conduct of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or depositors, file an application before the Tribunal on behalf of the members or depositors for seeking all or any of the relief specified.<\/p>\n

Eligibility criteria for class action
\nSub-section (3) (i) of Section 245 of the Companies Act, 2013 provides the requisite number of members provided in Sub-Section (1) shall be as under:
\n(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than such percentage of the total number of its members as may be prescribed, whichever is less, or any member or members holding not less than such percentage of the issued share capital of the company as may be prescribed, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares;<\/p>\n

(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.
\nThe requisite number of depositors provided in sub-section (1) shall not be less than one hundred depositors or not less than such percentage of the total number of depositors as may be prescribed, whichever is less, or any depositor or depositors to whom the company owes such percentage of total deposits of the company as may be prescribed.<\/p>\n

Nature of Relief
\nThe order by Tribunal may relate:
\n(a) to restrain the company from committing an act which is ultra vires the articles or memorandum of the company;
\n(b) to restrain the company from committing breach of any provision of the company\u2019s memorandum or articles;
\n(c) to declare a resolution altering the memorandum or articles of the company as void if the resolution was passed by suppression of material facts or obtained by mis-statement to the members or depositors;
\n(d) to restrain the company and its directors from acting on such resolution;
\n(e) to restrain the company from doing an act which is contrary to the provisions of this Act or any other law for the time being in force;
\n(f) to restrain the company from taking action contrary to any resolution passed by the members;
\n(g) to claim damages or compensation or demand any other suitable action from or against:
\n(i) the company or its directors for any fraudulent, unlawful or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part;
\n(ii) the auditor including audit firm of the company for any improper or misleading statement of particulars made in his audit report or for any fraudulent, unlawful or wrongful act or conduct; or
\n(iii) any expert or advisor or consultant or any other person for any incorrect or misleading statement made to the company or for any fraudulent, unlawful or wrongful act or conduct or any likely act or conduct on his part;
\n(h) to seek any other remedy as the Tribunal may deem fit.<\/p>\n

Effect:
\nAny order passed by NCLT shall be binding on the company and all its members, depositors, auditors, consultants and advisors or any other person associated with the company. Non-compliance of the order by the company shall be punishable with fine which shall not be less than \u20b9 5 Lakhs but which may extend to \u20b9 25 Lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term upto 3 years and with fine ranging from \u20b9 25,000 to \u20b9 1 lakh.<\/p>\n

\"Class<\/p>\n

Question 3.
\nWhat do you understand by \u2018class action suit\u2019 as introduced by the Companies Act, 2013? Explain the objective behind introducing this provision in the Companies. Act and the persons who can initiate such class action suit. (Dec 2017, 4 marks)
\nAnswer:
\nA class action suit is a lawsuit where a group of people representing a common interest may approach the Tribunal to sue or be sued. It is a procedural instrument that enables one or more plaintiffs to file and prosecute litigation on behalf of a larger group or class having common rights and grievances.<\/p>\n

The major objective behind the provision of class action suits is to safeguard the interests of the minority shareholders. So, class action suits are expected to play an important role to address numerous prejudicial and abusive acts committed by the Board of Directors and other managerial personnel.<\/p>\n

Person to initiate Class Action Suit:
\n(A) Members:
\nThe requisite number of members provided in sub-section (1) shall be as under:-
\n(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than such percentage of the total number of its members as may be prescribed, whichever is less, or any member or members holding not less than such percentage of the issued share capital of the company as may be prescribed, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares;
\n(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.<\/p>\n

(B) Depositors:
\nAccording to Section 245(3)(ii) the requisite number of depositors provided in Section 245(1) shall not be less than one hundred depositors or not less than such percentage of the total number of depositors as may be prescribed, whichever is less, or any depositor or depositors to whom the company owes such percentage of total deposits of the company as may be prescribed.<\/p>\n

Question 4.
\nIn a scheme of amalgamation, it was proposed that name of the transferor company shall be deemed to be name of transferee company. The Regional Director (RD), Ministry of Company Affairs, objected to the same on the ground that proposed name is undesirable if it is identical with or too nearly resembling name of an existing company. Decide if the stand taken by the RD is valid under the Companies Act, 2013. Reference may be made of decided case laws. (June 2018, 4 marks)
\nAnswer:
\nIt has been held in earlier judgement PMP Auto Industries Ltd. that- in case of amalgamation Chapter XV of the Companies Act, 2013 is a complete code in the nature of a \u201csingle window clearance” system, the object of which is to eliminate frequent applications being made to the Court in order effectively to-implement a scheme of amalgamation which the Court sanctions in exercise of its powers. Further in case, Michelin India Private Limited High Court held that a complete code by itself pr\\ the subject of arrangement\/compromise and reconstruction comprehensive enough to include a change in the name consequent on the amalgamation or arrangement.
\nThus, Considering the above, in present case tne objection of RD is invalid.<\/p>\n

Question 5.
\n\u201cClass action suit is a new mechanism in India to claim the loss caused to the specified stakeholders of the Company not only from the Company but also from other entities\u201d. Analyse the statement in brief. (June 2019, 4 marks)
\nAnswer:
\nA class action suit is a new mechanism to claim the loss caused to the specified stakeholders of the company not only from the company but also from other entities. Various persons\/ entities against whom such actions can be taken are:<\/p>\n