Alama Ltd. was carrying on textile business which was acquired by another company by paying suitable compensation. The directors of Alama Ltd. who had majority voting rights changed the object of the company at the gener

Chapter XVI of the Companies Act, 2013 deals with the provisions relating to the prevention of oppression and mismanagement of a company. Oppression and mismanagement of a company mean that the affairs of the company are being conducted in a manner that is oppressive and biased against the minority shareholders or any member or members of the company. To prevent the same, there are provisions for the prevention and mismanagement of a company. An attempt to force new and more risky objects upon an unwilling minority may in circumstances amount to oppression. This was held in Hindustan Co-operative Insurance Society Ltd., AIR. 1961 Cal. 443 wherein the life insurance business of a company was acquired in 1956 by the Life Insurance Corporation of India on payment of compensation. The directors, who had the majority voting power, refused to distribute this amount among shareholders, rather they passed a special resolution changing the objects of the company to utilise the compensation money for the new objects. This was held to be "Oppression". The court observed: "The majority exercised their authority wrongfully, in a manner burdensome, harsh and wrongful. They attempted to force the minority shareholders to invest their money in different kind of business against their will. The minority had invested their money in a life insurance business with all its safeguards and statutory protections. But they were being forced to invest where there would be no such protections or safeguards". The minority shareholders will succeed in the case against the directors. "The essence of the matter seems to be that the conduct complained of should at the lowest, involve a visible departure from the standards of fair dealing, on which every shareholder who entrusts his money to the company is entitled to rely." Hence, the minority shareholders of Alama Ltd. can petition the National Company Law Tribunal under section 241(1) of the Companies Act, 2013 and will succeed in their claim.