TaxTMI 
TaxTMI 
2026 (1) TMI 663
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....te proceedings under Sections 241 & 242 of the Companies Act. 2. Owing to the provisions of Section 244(1) of the Companies Act, 2013, in case of a company having share capital, members constituting less than one- tenth of the total number of members or holding less than one-tenth of the total issued share capital of a company are barred from initiating proceedings under Section 241 of the Companies Act, 2013. An exception is, however, carved out by the proviso to sub-section (1) of Section 244, which contemplates that the Tribunal, on an application, may grant a waiver of the conditions required under sub-clauses (a) and (b) of sub-section (1) of Section 244 of the Companies Act, 2013. 3. The Appellant company, in support of its challenge to the impugned order, has submitted that the impugned order reflects a non-application of mind by the Learned NCLT, as it did not consider that Respondent Nos. 2 & 3, who filed the Company Petition, did so in their capacity as beneficiaries of a trust. He contends that a beneficiary of a trust under law, does not have a tangible, legally enforceable right to initiate proceedings against a third party in respect of trust property. Hence, th....
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....an application filed by beneficiaries under Section 244 would be unsustainable. 6. Learned Counsel for the Appellant further argues that a beneficiary lacks an independent right to represent the trust unless the trust deed so permits. She relies on Section 56 of the Indian Trusts Act, 1882, which permits a beneficiary to file a suit for recovery of trust property only where the beneficiary's interest is adversely affected to contend that apart from this limited exception, the beneficiaries of a trust cannot maintain proceedings under Sections 241 & 242 of the Companies Act, 2013. 7. We answer this point by noting that Section 56 enables beneficiaries to sue for recovery of trust property in limited circumstances. However, proceedings under Section 244 of the Companies Act are not standalone recovery suits; they are a preliminary mechanism enabling a person to seek relief under Sections 241 & 242. It is common ground that Mr. Dhruv Agarwal (sole beneficiary of Dhruv Agarwal Benefit Trust) and Mr. Manish Agarwal (sole beneficiary of Manish Agarwal Benefit Trust) held 0.04% and 0.16% shareholding respectively in their individual capacity as of September 2019. Both are parties to....
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....fication of the register of members under Section 59 read with Section 430 of the Companies Act, 2013, which vests jurisdiction in the Tribunal. 11. It follows that when the Tribunal considers an application under Section 244 of the Companies Act, 2013, it need not decide the merits under Section 241; rather, it must be prima facie satisfied from the records that exceptional circumstances exist to justify a waiver of the statutory thresholds under Section 244(1)(a) and (b). A detailed merits inquiry is not appropriate at this stage. The proviso to Section 244 grants the Tribunal discretionary powers to waive the statutory restrictions, with the objective of ensuring that members who do not satisfy the prescribed thresholds are not unduly deprived of remedies for oppression and mismanagement, provided exceptional circumstances exist. 12. We are of the view that the restrictions in Section 244(1)(a) and (b) are not absolute; they were enacted to prevent frivolous litigation and also to prevent multiplying of litigation in the hands of stray shareholders. The proviso renders the conditions flexible and vests discretion in the Tribunal to balance equitable considerations protecti....
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....019 and 09.01.2020, and adoption memos filed on 09.01.2020 the Tribunal applied the ratio in Cyrus Investments Pvt. Ltd. v. Tata Sons Ltd. & Ors. (2017 SCC Online NCLAT 261) and concluded that the proviso to Section 244(1)(b) permits the Tribunal to grant a waiver of any of the requirements in Section 244(1)(a) & (b) to enable a person to proceed under Section 241 of the Companies Act, 2013. 16. The Appellant argued that a Section 244 application filed subsequent to a petition under Sections 241 & 242 undermines its sanctity and that the waiver application should have been filed along with the Company Petition, not afterwards. The Respondents replied that there is no statutory bar to a subsequent Section 244 application, and that mismanagement or oppression may become apparent only later; hence a subsequent waiver application can be valid. 17. The NCLT, after considering Cyrus Investments and applying its tests, considered the Section 244 application and the safeguards to ensure that a waiver is not granted lightly. The wider parameters as prescribed therein; in the aforesaid Judgment is enumerated hereunder: - "(i) Whether the applicants are the members of the compa....
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....e. The Tribunal is required to record only prima facie satisfaction rather than decide the controversy on merits. On the facts before it, the Tribunal held that exceptional circumstances prevailed to grant the waiver, reserving all issues of mismanagement and oppression for adjudication in the principal proceedings under Sections 241 & 242. 22. The logic which has been assigned by the Tribunal while passing of the Impugned Order does not seem to be contrary of the records, so far as it relates to the holding of shares by the Applicants to the Application under Section 244 of the Companies Act, 2013. The arguments extended that the order impugned is without rational and without application of mind is contrary to the records, which was otherwise established. Even otherwise, we are of the view that the pendency of the civil suits or its ultimate decision which will be taken thereof, do not create any restriction as such for granting of a waiver under Section 244 of the Companies Act, for the purposes of initiation of the proceedings under Sections 241 & 242 of the Companies Act, 2013. Hence, the orders that were passed on Suit No.56/2019, as well as Suit Nos.736 & 737/2019, though ....