245. Class action
(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) 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 following orders, namely:—
(a) to restrain the company from committing an act which is ultra vires the
articles or memorandum of the company;
(b) to restrain the company from committing breach of any provision of the
company’s memorandum or articles;
(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;
(d) to restrain the company and its directors from acting on such resolution;
(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;
(f) to restrain the company from taking action contrary to any resolution passed
by the members;
(g) to claim damages or compensation or demand any other suitable action from
or against—
(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;
(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
(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;
(h) to seek any other remedy as the Tribunal may deem fit.
(2) Where the members or depositors seek any damages or compensation or demand
any other suitable action from or against an audit firm, the liability shall be of the firm as well
as of each partner who was involved in making any improper or misleading statement of
particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner.
(3) (i) The requisite number of members provided in sub-section (1) shall be as under:—
(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;
(b) in the case of a company not having a share capital, not less than one-fifth of
the total number of its members.
(ii) The 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.
(4) In considering an application under sub-section (1), the Tribunal shall take into
account, in particular—
(a) whether the member or depositor is acting in good faith in making the
application for seeking an order;
(b) any evidence before it as to the involvement of any person other than directors
or officers of the company on any of the matters provided in clauses (a) to (f) of subsection
(1);
(c) whether the cause of action is one which the member or depositor could
pursue in his own right rather than through an order under this section;
(d) any evidence before it as to the views of the members or depositors of the
company who have no personal interest, direct or indirect, in the matter being proceeded
under this section;
(e) where the cause of action is an act or omission that is yet to occur, whether
the act or omission could be, and in the circumstances would be likely to be—
(i) authorised by the company before it occurs; or
(ii) ratified by the company after it occurs;
(f) where the cause of action is an act or omission that has already occurred,
whether the act or omission could be, and in the circumstances would be likely to be,
ratified by the company.
(5) If an application filed under sub-section (1) is admitted, then the Tribunal shall
have regard to the following, namely:—
(a) public notice shall be served on admission of the application to all the members
or depositors of the class in such manner as may be prescribed;
(b) all similar applications prevalent in any jurisdiction should be consolidated
into a single application and the class members or depositors should be allowed to
choose the lead applicant and in the event the members or depositors of the class are
unable to come to a consensus, the Tribunal shall have the power to appoint a lead
applicant, who shall be in charge of the proceedings from the applicant’s side;
(c) two class action applications for the same cause of action shall not be allowed;
(d) the cost or expenses connected with the application for class action shall be
defrayed by the company or any other person responsible for any oppressive act.
(6) 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.
(7) Any company which fails to comply with an order passed by the Tribunal under
this section shall be punishable with fine which shall not be less than five lakh rupees but
which may extend to twenty-five lakh rupees and every officer of the company who is in
default shall be punishable with imprisonment for a term which may extend to three years and
with fine which shall not be less than twenty-five thousand rupees but which may extend to
one lakh rupees.
(8) Where any application filed before the Tribunal is found to be frivolous or vexatious,
it shall, for reasons to be recorded in writing, reject the application and make an order that the
applicant shall pay to the opposite party such cost, not exceeding one lakh rupees, as may be
specified in the order.
(9) Nothing contained in this section shall apply to a banking company.
(10) Subject to the compliance of this section, an application may be filed or any other
action may be taken under this section by any person, group of persons or any association
of persons representing the persons affected by any act or omission, specified in
sub-section (1).