Class action under Section 245 can cover past transactions where statutory threshold and prima facie prejudice are shown.
Section 245 class action proceedings require satisfaction of the prescribed shareholding threshold and a prima facie view that the company's affairs are prejudicial to members' interests. The discussion notes that the provision is broad enough to support reliefs such as damages, compensation, and other suitable remedies, and that the availability of oppression and mismanagement remedies does not by itself bar maintainability. It also states that allegations concerning past and concluded transactions may be considered where the statutory threshold and prima facie opinion requirements are met, so the petition may proceed beyond the admission stage.
Issues: (i) whether the petitioners satisfied the statutory threshold and formed the requisite prima facie opinion to invoke class action proceedings under Section 245 of the Companies Act, 2013; (ii) whether allegations concerning past and concluded transactions could be entertained in proceedings under Section 245.
Issue (i): Whether the petitioners satisfied the statutory threshold and formed the requisite prima facie opinion to invoke class action proceedings under Section 245 of the Companies Act, 2013.
Analysis: The petitioners held the minimum shareholding prescribed under Rule 84(3)(ii)(b) of the National Company Law Tribunal Rules, 2016. The Tribunal held that, at the admission stage, the pleaded facts disclosed a prima facie opinion that the management or conduct of the company's affairs was prejudicial to the interests of the company and its members. It further held that the breadth of Section 245 permits members to seek reliefs including damages, compensation, and other suitable remedies, and that the existence of an alternative remedy under oppression and mismanagement provisions does not by itself defeat maintainability under Section 245.
Conclusion: The petitioners were found to have met the threshold for invoking class action proceedings, and the objection to maintainability was rejected.
Issue (ii): Whether allegations concerning past and concluded transactions could be entertained in proceedings under Section 245.
Analysis: The Tribunal construed Section 245 as not being confined only to future restraint or continuing wrongs. It held that the provision is wide enough to cover claims for compensation, damages, and other remedies in respect of transactions already completed, provided the statutory opinion and threshold requirements are satisfied. The objection that only present and continuing conduct could be questioned was therefore not accepted at the admission stage.
Conclusion: Proceedings under Section 245 were held to be maintainable even in respect of the impugned past transactions.
Final Conclusion: The maintainability objection was rejected, the class action petition was admitted for issuance of notice, and the matter was directed to proceed further on merits.
TaxTMI 
AI Drafter ✕
TaxTMI 
