Pioneer Finance Ltd., is a Non-Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). The object clause of its Memorandum states that the Company shall provide finance to public at interest, agai

The facts of the given situation are similar to the decision of High Court in 'Bharat Insurance Ltd. v. Kanhya Lal, A.I.R. 1935 Lah. 792'. The relevant part of the decision is discussed as under: The plaintiff was a shareholder of the Bharat Insurance Company. One of the objects of the company was: "To advance money at interest on the security of land, houses, machinery and other property situated in India..." The plaintiff complained that "several investments had been made by the company without adequate security and contrary to the provisions of the memorandum and therefore, prayed for perpetual injunction to restrain it from making such investments". The Court observed: "In all matters of internal management, the company itself is the best judge of its affairs and the Court should not interfere. But application of assets of a company is not a matter of internal management. As directors are acting ultra vires in the application of the funds of the company, a single member can maintain a suit". It means that the rule in 'Foss v. Harbottle' will operate in full force only when the majority of shareholders through their chosen directors act within the extent of the powers of the company. Therefore, where the directors representing the majority of shareholders perform an illegal or ultra vires act, an individual shareholder has right to bring an action. The majority of shareholders have no right to confirm an illegal or ultra vires transaction of the company. In such case a shareholder has the right to restrain the company by an order or injunction of the court from carrying out an ultra vires act. In view of the above mentioned case, it can be said that Atul's application is tenable.