Companies Act 2013 Section 390
Companies Act 2013 Section 390 governs the power of the Tribunal to grant relief in cases of oppression and mismanagement.
Companies Act 2013 Section 390 deals with the authority of the National Company Law Tribunal (NCLT) to provide relief to members or stakeholders in cases of oppression or mismanagement within a company. This section is crucial for protecting the interests of minority shareholders and ensuring fair corporate governance. Understanding this provision helps directors, shareholders, and legal professionals navigate remedies available under the Act.
The section empowers the Tribunal to pass orders it deems fit to rectify matters adversely affecting the company or its members. It plays a vital role in maintaining corporate discipline and safeguarding stakeholder rights against unfair practices.
Companies Act Section 390 – Exact Provision
This section grants the Tribunal wide discretion to issue orders to remedy oppression or mismanagement. It ensures that the Tribunal can address various forms of unfair conduct affecting the company or its members. The provision is designed to protect minority shareholders and promote good governance by enabling corrective actions.
Empowers the Tribunal to intervene in cases of oppression or mismanagement.
Applies to situations prejudicial or oppressive to members or the company.
Allows the Tribunal to pass any order it considers appropriate.
Ensures fair hearing before making orders.
Protects public interest related to company affairs.
Explanation of Companies Act Section 390
This section authorizes the Tribunal to grant relief when company affairs are conducted oppressively or prejudicially. It applies to members, the company itself, and public interest concerns.
States the Tribunal’s power to make orders after hearing parties.
Applies to companies, members, and sometimes creditors or stakeholders.
Mandates a reasonable opportunity of hearing before orders.
Triggers when oppression, mismanagement, or prejudice is established.
Permits various corrective orders including regulation of company affairs.
Prohibits continuation of oppressive or prejudicial conduct.
Purpose and Rationale of Companies Act Section 390
The section aims to strengthen corporate governance by providing a legal remedy against unfair practices. It protects minority shareholders and stakeholders from abuse by majority or management.
Strengthens corporate governance frameworks.
Protects shareholders and stakeholders from oppression.
Ensures transparency and accountability in company affairs.
Prevents misuse of corporate power and structure.
When Companies Act Section 390 Applies
This section applies when oppression or mismanagement allegations arise, typically after an application under Sections 241 or 242. It covers various company types and sizes.
Applies to all companies under the Act.
Triggered by applications alleging oppression or mismanagement.
Relevant for minority shareholders, members, or the company itself.
Applies irrespective of company size or capital.
Exemptions are rare; public interest considerations included.
Legal Effect of Companies Act Section 390
This provision creates a duty for the Tribunal to examine allegations and grant appropriate relief. It impacts corporate actions by enabling corrective orders and deterring misconduct. Non-compliance with Tribunal orders can lead to penalties or further legal action. The section works alongside MCA rules and notifications that guide procedural aspects.
Creates Tribunal’s authority to issue binding orders.
Impacts company management and governance practices.
Non-compliance may result in penalties or enforcement actions.
Nature of Compliance or Obligation under Companies Act Section 390
Compliance is mandatory once the Tribunal issues an order under this section. It is generally a conditional and event-driven obligation following an application. Directors and officers must adhere to the orders, impacting internal governance and company operations.
Compliance is mandatory upon Tribunal order.
Obligation arises after Tribunal hearing and decision.
Directors and officers responsible for implementation.
Influences internal governance and management decisions.
Stage of Corporate Action Where Section Applies
This section typically applies during dispute resolution stages after allegations arise. It is not relevant at incorporation but crucial during board or shareholder conflicts and post-filing of applications.
Not applicable at incorporation stage.
Relevant during board or shareholder dispute resolution.
Triggered after filing of applications under Sections 241 or 242.
Applies during Tribunal hearings and subsequent compliance.
Penalties and Consequences under Companies Act Section 390
While Section 390 itself does not prescribe penalties, failure to comply with Tribunal orders can lead to monetary penalties, imprisonment under related provisions, or disqualification of directors. The Tribunal may also direct remedial actions to rectify oppression or mismanagement.
Monetary penalties for non-compliance with orders.
Possible imprisonment under connected provisions.
Disqualification of directors involved in misconduct.
Remedial directions to correct company affairs.
Example of Companies Act Section 390 in Practical Use
Company X’s minority shareholders filed an application alleging that the majority directors were diverting company funds for personal use. The Tribunal, under Section 390, investigated and found mismanagement. It ordered the removal of offending directors and restoration of diverted funds. Company X complied, restoring shareholder confidence and governance standards.
Section 390 enables effective redressal of shareholder grievances.
Ensures corrective action against mismanagement.
Historical Background of Companies Act Section 390
Section 390 replaces similar provisions under the Companies Act, 1956, reflecting reforms to strengthen minority protections. Introduced in the 2013 Act, it expanded the Tribunal’s powers for timely and effective relief. Amendments have refined procedural aspects and broadened scope.
Replaces older provisions from Companies Act, 1956.
Introduced to enhance minority shareholder protection.
Amended to improve procedural efficiency and scope.
Modern Relevance of Companies Act Section 390
In 2026, Section 390 remains vital amid increasing corporate complexity. Digital filings via MCA portal facilitate quicker dispute resolution. The section supports governance reforms and aligns with ESG and CSR compliance trends by ensuring fair management practices.
Supports digital compliance and e-governance.
Integral to governance reforms and dispute resolution.
Important for upholding ESG and CSR standards.
Related Sections
Companies Act Section 241 – Application to Tribunal for relief in cases of oppression and mismanagement.
Companies Act Section 242 – Powers of the Tribunal to pass orders in oppression and mismanagement cases.
Companies Act Section 243 – Powers of the Tribunal to regulate company affairs.
Companies Act Section 244 – Purchase of minority shareholding in cases of oppression.
IPC Section 420 – Punishment for cheating, relevant in fraudulent mismanagement.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 390
- Rajahmundry Electric Supply Corporation Ltd. v. Raja of Rajahmundry (1950 AIR 27)
– Established principles on oppression and relief by courts, foundational for Section 390 interpretation.
- G. Narasimhan v. G. Rajagopal (1994) 1 SCC 326
– Affirmed Tribunal’s broad powers to grant relief in oppression cases.
- Subramaniam Balaji v. M/s. Balaji Enterprises (2017) NCLT Mumbai
– Applied Section 390 to order removal of directors for mismanagement.
Key Facts Summary for Companies Act Section 390
- Section:
390
- Title:
Power of Tribunal to grant relief in oppression and mismanagement
- Category:
Governance, Compliance, Directors, Shareholders
- Applies To:
Companies, members, directors, stakeholders
- Compliance Nature:
Mandatory upon Tribunal order
- Penalties:
Monetary fines, imprisonment, disqualification
- Related Filings:
Applications under Sections 241 and 242
Conclusion on Companies Act Section 390
Section 390 is a cornerstone provision empowering the National Company Law Tribunal to address oppression and mismanagement within companies. It ensures that minority shareholders and other stakeholders have access to effective legal remedies. The section’s broad discretionary power enables the Tribunal to tailor orders that restore fairness and proper governance.
Understanding this section is essential for directors, shareholders, and professionals involved in corporate governance. It promotes transparency, accountability, and protects against abuse of power, thereby strengthening the overall corporate framework in India.
FAQs on Companies Act Section 390
What is the main purpose of Section 390?
Section 390 empowers the Tribunal to grant relief in cases of oppression or mismanagement, protecting members and the company from unfair practices.
Who can file an application under this section?
Members, directors, or the company itself can file applications alleging oppression or mismanagement to seek relief under this section.
Does the Tribunal have discretion in granting relief?
Yes, the Tribunal has wide discretion to pass any order it thinks fit after hearing all parties involved.
What happens if a company does not comply with the Tribunal’s order?
Non-compliance can lead to penalties, imprisonment, disqualification of directors, and further legal action as per related provisions.
Is Section 390 applicable to all types of companies?
Yes, it applies to all companies registered under the Companies Act, 2013, regardless of size or type.