Yasho Fashions Ltd., a Company floated by Yasho, a graduate from NIFT, Mumbai was initially formed to set up a retail store of niche boutiques. As part of growth plans, the Company had received funding from Venture Capit

Section 245 of the Companies Act, 2013 (the Act) and Rules applicable thereto, allows members having requisite strength, to initiate class suit actions for restraining the company from committing any ultra vires act. The relevant provisions are discussed hereinafter: Matters for which Class Action is allowed under Section 245(1): Such number of member or members, depositor or depositors or any class of them, 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: to restrain the company from committing an act which is ultra vires the articles or memorandum of the company; to restrain the company from committing breach of any provision of the company's memorandum or articles; 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; to restrain the company and its directors from acting on such resolution; 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; to restrain the company from taking action contrary to any resolution passed by the members; to claim damages or compensation or demand any other suitable action from or against - 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; 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 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; to seek any other remedy as the Tribunal may deem fit. Further, as per Sec 245(3) the minimum strength required for initiation of a Class Action Suit by Members, Section 245(3)(i) as follows: 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: In case of a company not having share capital, more than one-fifth of the total number of its members. Also, as per National Company Law Tribunal Rules, 2016 under Rule 84(3) thereof, in case of a company having a share capital, the requisite number of member or members to file an application under sub-section (1) of section 245 shall be - (a) at least 5% of the total number of members of the company; or (b) 100 members of the company, whichever is less; or (a) member or members holding not less than 5% of the issued share capital of the company, in case of an unlisted company; (b) member or members holding not less than 2% of the issued share capital of the company, in case of a listed company Accordingly, the members of the company comprising of the minimum required strength as mentioned above, may choose to file a class action suit for restraining the company from taking any action which is ultra vires the memorandum or the articles of association of the company or which is in breach of any provision of the memorandum of association of the company. As regards the possibility of restraining the company from venturing into the new business, the same can be done on the grounds mentioned under Sec 245(1) of the Act as mentioned above. Section 245(1)(a) specifically provides for a ground of filling an application before the Tribunal to restrain the company from committing an act which is ultra vires the articles or memorandum of the company.