Preference shareholders can seek redemption & remedies through class action under Companies Act, 2013

The Appellate Tribunal ruled that preference shareholders have the standing to file for redemption under Section 55(3) of the Companies Act, 2013 and can also seek remedies through class action under Section 245. The Tribunal clarified that preference shareholders should not be left without a remedy and can invoke the Tribunal's inherent power for relief. The NCLT's decision was set aside, and the case was remitted back for reconsideration. No costs were awarded.

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Issues Involved:
1. Locus Standi of Preference Shareholders to file for redemption under Section 55(3) of the Companies Act, 2013.
2. Applicability of Section 245 of the Companies Act, 2013 for class action by preference shareholders.
3. Tribunal's inherent power to provide relief to preference shareholders.

Detailed Analysis:

1. Locus Standi of Preference Shareholders to file for redemption under Section 55(3) of the Companies Act, 2013:
The Tribunal initially dismissed the application of the Appellant on the grounds that preference shareholders have no locus standi to file for redemption under Section 55(3). Section 55(3) mandates that the company, with the consent of 3/4th in value of such preference shares and Tribunal approval, may issue further redeemable preference shares if unable to redeem the existing ones. The Tribunal interpreted that only the company can file such a petition, not the shareholders. However, the Appellate Tribunal clarified that the intention of the legislature was to ensure the redemption of preference shares, thereby implying that preference shareholders should not be left without remedy. The Tribunal's inherent power can be invoked by aggrieved preference shareholders to seek appropriate relief.

2. Applicability of Section 245 of the Companies Act, 2013 for class action by preference shareholders:
The Appellant argued that they should be allowed to file under Section 245, which deals with class action for seeking remedies against the company and its directors. The Respondent countered that Section 245 requires a minimum requisite number of members or depositors to file an application, which was not met by the Appellant alone. The Appellate Tribunal noted that preference shareholders fall within the definition of 'members' under Section 2(55) read with Section 88 of the Companies Act, 2013, and hence, they can file a petition under Section 245 as a class action suit if aggrieved by the conduct of the company's affairs.

3. Tribunal's inherent power to provide relief to preference shareholders:
The Appellate Tribunal emphasized that the inherent powers of the Tribunal under Rule 11 of NCLT Rules, 2016, can be exercised to provide appropriate relief to preference shareholders. The legislative intent behind Section 55 was to ensure the redemption of preference shares and avoid irredeemable preference shares. Thus, even in the absence of explicit provisions for preference shareholders to seek relief, the Tribunal can use its inherent powers to address their grievances.

Conclusion:
The Appellate Tribunal set aside the NCLT's order, holding that preference shareholders are not remediless and can file applications under Section 55(3) and Section 245 of the Companies Act, 2013. The matter was remitted back to the NCLT, Chennai Bench, for reconsideration as per the law. No order as to costs was made.

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