Oppression and Mismanagement :

The management of companies is based on the principle of majority rule ordinarily; decision of the majority is the rule for the minority. This sound principle has, occasionally, been abused and the whip of the majority has often produced sullen effects, prejudicial to the best interests of the shareholders. Until the commencement of the Companies Act, 1956 the only remedy available (under the Indian Companies Act, 1913) to an oppressed minority was to petition to the Court to wind up the company on the ground that it was “just and equitable” so to do. The winding up remedy is, however, not always advantageous to the petitioning shareholder, or shareholders because the very persons whose conduct is complained of, may be the only persons capable of buying up the shares of the dissentients. Nevertheless, the oppression or mis-management calls for some remedial action. Sections 397 to 409 of the Companies Act, 1956 are the specific provisions which empowers (i) the Company Law Board and (ii) the Central Government to deal with such situations preventing oppression and mis-management in the company.

Meaning of Oppression- As per section 397 of the Act, where the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members, may be termed as oppression. There the members complaining may apply to the Company Law Board for appropriate relief subject to section 399.

Meaning of Mis- management- As per section 398 of the Act, where the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interests of the company, or where any material change has taken place in the management or control of the company, by which it is likely that the affairs of the company will be conducted in the manner prejudicial to public interest or prejudicial to the interests of the company. This may be termed as mis-management in the company. The complaining members of a company may apply to the Company Law Board for the relief subject to Section 399. Section 399 provides, however, that a single member is not entitled to make an application under either of the sections, viz., Sections 397 and 398.