Class Action Suit Under

Companies Act 2013

A company is an association of individuals working with a
common aim to achieve the purpose of the formation of the
company and to earn maximum profit. There are difference
of interests and opinions among individuals which results in
forming of majority and minority group. These groups
requires proper balancing under strict judicial securitization
so that position of any of the group is not misused or
abused. In todays scenario , this topic has become a
significant part of the companies law and practice.

How do companies run?, Who runs them?, Whether majority

shareholders or directors run them? How majority oppress
the minority? These questions needs to be answered for
understanding the concept of Oppression and
Mismanagement.
Meaning Of Oppression
 Oppression
Protection of minority Shareholders with in the
domain of corporate activity constitutes one of
the most difficult problem facing modern
company law.
A Proper balance of the rights of majority &
minority shareholders is essential for the smooth
functioning of the company
Palmer
Dictionary Meaning of oppression
oppression is any act exercised in manner
burdensome harsh &wrongful
Prevention Of Oppression under New
Company Act 2013

Chapter-XVI

Section 241 to Section 246

Application to Tribunal for relief in cases of

Oppression u/s 241

A person who has right to apply for application u/s

244

Class action suit u/s 245

Class Action : A New addition in Indian Jurisprudence

Class Action is one of the youngest additions to

Indian jurisprudence particularly, in Indian
Corporate Jurisprudence. Class Action aims to
prevent Oppression and Mismanagement in
Companies. The Provisions relating to Oppression
and Mismanagement are in Chapter XVI of the
Companies Act, 2013

Credit to the Satyam scam, India has introduced

class action suit in the new Companies Act, 2013
by means of Section 245 which is notified by the
Ministry of Corporate Affairs.
Class Action : A New addition in Indian
Jurisprudence
The concept of Class Action Suits is among one of the
many novelties introduced by the Companies Act, 2013.
Thought the concept per se is not new but in Indian
context it has found statutory recognition and
enforceability now only by means of Companies Act
2013.
The first time class action suit came to the spotlight in
the context of securities market was when the Satyam
scam broke out in 2009.At that time, the Indian
investors in India couldn't take any legal recourse
against the company while their counterparts in USA
filed class action suit claiming damages from the
company and the auditing firm.
Class Action suit
 Class Action Suit

Based on US Model. Class Action suit famous in

the United States with companies like Eron Paying
up to $7.2 Billion as compensation some went up
to $206 Billion over a period of 25 years.

This Concept was recommended by J.J Irani

Committee Report in 2005

New Concept in India let us we hope that it stands

the test of time and gives us a more efficient and
transparent company law regime.
 Class Action Suit
A class action is a law suit in which a single person
or a small group of peoples represents the interest
of a larger group before court.
It is a procedural device enabling one or more
plaintiffs to file and prosecute a litigation on behalf
of a larger group or class, where in such class has
common rights and grievances.
In India, a representative suit may be instituted
under the India Civil Procedure Code, 1908 for the
befit of, or on behalf of, the interested parties. A
similar concept has also been evolved by the courts
in India in form of PIL and Social Interest
Litigations
 Difference between application for prevention of

oppression and mismanagement u/s 241 to 244 and

Class Action Suits u/s 245

Meaning of Class Action
Suit
PROVISIONS RELATING TO CLASS ACTION SUIT
Section 245 of the Companies Act, 2013 contains
provisions regarding Class Action Suits

In simple terms, a class action suit refers to a

lawsuit that allows a large number of people with
a common interest in a matter to sue or be sued
as a group. It is a procedural device enabling one
or more plaintiffs to file and prosecute a litigation
on behalf of a larger group or class, wherein such
class has common rights and grievances.
Filling of class action suit
 Who can sue?

Shareholder and Depositors

What can they claim?

Compensation
Compensation for What?

Damages for any fraudulent

,unlawful or wrongful act or
conduct or any likely act or
conduct on his part
Against whom a Class Action Suit
can be filed?
 Against Whom?
Class action suit can be filed against the:

Company,

Any of its directors

Auditor, including audit firm

Expert or advisor or consultant or any other person

 Before which authority class
action suit needs to be filed?
Application for class action suit has to be filed
before the National Company Law Board Tribunal
(NCLT/Tribunal)
Penalty for non-compliance of order passed by

Tribunal

Any company which fails to comply with an order

passed by the Tribunal under section 245 shall be
punishable with fine which shall not be less thanRs. 5
Lakhs but which may extend toRs. 25 Lakhs and every
officer of the company who is in default shall be
punishable with imprisonment for a term which may
extend to 3 years and with fine which shall not be less
than Rs. 25,000/- but which may extend toRs. 1,00,000/
-.
Under Section 425 of the Companies Act, 2013 the
Tribunal has also been conferred the same jurisdiction,
powers and authority in respect of contempt of its
orders as conferred on High Court under the Contempt
of Courts Act, 1971.
 Biggest Scams

Old Scams analyzed in New Light

Harshad Mehta Scam
Ketan Parekh Scam
14,000 Satyam Scam
2 G Scam
2 G Scam
2 G Scam
 Satyam Scam
The Satyam scam involved a fraudulent scheme wherein the revenues
of Satyam Computers Services Ltd. were materially overstated based
on falsified invoices for hundreds of millions of dollars in consumer
products that did not actually exist. Since Satyams American
Depository Shares were listed on the New York Stock Exchange,
several Class Action Suits were filed against Satyam and the
Managing Director including other members of the Management of
Satyam on behalf of purchasers of Satyams American Depository
Receipts, in the U.S.

 Satyam Scam
However, due to the absence of any statutory
provision for Class Action under the Indian
Companies Act 1956 to sue the audit firms no
similar proceedings could be initiated by the
affected shareholders of Satyam in India. This
lacuna has been sought to be addressed by the
legislature while drafting of the Companies Act,
2013 and introducing the provision of Class
Action by way of Section 245
Other points relating to Class
Action Suits
The cost or expenses connected with the
publication of the public notice shall be borne by the
applicant and shall be defrayed by the company or
any other person responsible for any oppressive act.
Any order passed by the Tribunal shall be binding
on the company and all its members, depositors and
auditor including audit firm or expert or consultant
or advisor or any other person associated with the
company.
Provisions relating to class action suits do not
apply to a banking company.
What will the future look like

Leading Class Action Suits in

World
AOL Time Warner
Tyco International
World Com
Enron
Enron
Rising Class Action
Abroad
 Conclusion
The recent collapse of a number of major corporations
worldwide has created an environment requiring much
greater vigilance with regard to corporate governance
and the actions of key managerial personnel with in
companies. Companies are likely to face increased
threat of litigation posed be Class actions and other
multi-claimant proceeding seeking significant relief
against companies, their directors ,officers as well as
shareholders to bring class actions against companies
and their directors for compensation claims associated
with their investment in companys shares,one recent
example in India being the Sahara case. Whether the
powers to decide such securities and Exchange Board
of India is yet unclear.
Thanks