Comprehension
An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
Question: 1

The parties in this case approached the Supreme Court of India under which of the following provision

Updated On: Jan 13, 2026
  • Appeal under section 423 of the Companies Act, 2013
  • A Class Action Suit under Section 245 of the Companies Act, 2013.
  • Special Leave Petition (SLP) under Article 136 of the Constitution of India
  • Appeal under section 421 of the Companies Act, 2013.
Show Solution

The Correct Option is A

Solution and Explanation

Section 423 of the Companies Act, 2013, permits appeals to a superior body, including the Supreme Court, within corporate legal matters.
The correct answer is (A): Appeal under section 423 of the Companies Act, 2013

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Question: 2

Rule of ‘supremacy of majority’ in governing the affairs of a company has been settled in a very old leading case of Foss v. Harbottle (1843) 2 Hare 461. In India, which case diluted the majority rule and held that interest of the company was above the interest of its shareholders either majority or minority?

Updated On: Jan 13, 2026
  • Rajahmundry Electric Supply Corporation Ltd. v. A. Nageshwara Rao
  • Bagree Cereals v. Hanuman Prasad Bagri.
  • Shanti Prasad Jain v. Kalinga Tubes Ltd
  • Needle Industries (India) Ltd. v. Needle Industries Newey (India)
    • Show Solution

    The Correct Option is D

    Solution and Explanation

    The Needle Industries case determined that the company's well-being takes priority over shareholder concerns, safeguarding the rights of minority shareholders.
    The correct answer is (D): Needle Industries (India) Ltd. v. Needle Industries Newey (India)

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    Question: 3

    While recommending “Separation of the Roles of Non-executive Chairperson and Managing Director/ CEO”, the Kotak Mahindra Committee quoted the following text: “given the importance and the particular nature of the chairmen’s role, it should in principle be separate from that of the chief executive. If the two roles are combined in one person, it represents a considerable concentration of power”. This quote refers to which of the following Committee Report?

    Updated On: Jan 13, 2026
    • Cohen Committee Report
    • Cadbury Committee Report
    • Hampel Committee Report
    • Narayana Murthy Committee Report
    Show Solution

    The Correct Option is B

    Solution and Explanation

    The Cadbury Committee Report is recognized for recommending the separation of the Chairperson and CEO roles. This aims to avoid an excessive concentration of power, thereby fostering improved corporate governance.
    The correct answer is (B): Cadbury Committee Report

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    Question: 4

    Which of the following statement is true regarding share qualification requirement under section 244 for applying for relief from oppression/ mismanagement under section 241 of the Companies Act, 2013 (in the case of a company having a share capital)?

    Updated On: Jan 13, 2026
    • Members not less than 100 members of the company or 10% of the total number of its members, whichever is less or any member or members holding not less than 10% of the issued share capital of the company
    • Members not less than 100 members of the company and 10% of the total number of its members or members holding not less than 10% of the issued share capital of the company
    • Not less than 20% of the total number of its members
    • Members not less than 50 members of the company and 5% of the total number of its members or members holding not less than 5% of the issued share capital of the company.
    Show Solution

    The Correct Option is A

    Solution and Explanation

    As per section 244 of the Companies Act, 2013, eligibility for seeking relief from oppression or mismanagement is granted to members. Specifically, this applies to those holding a minimum of 10% of the company's issued share capital.
    The correct option is (A): Either a minimum of 100 members of the company, or 10% of the total member count (whichever is lower), or any member(s) holding not less than 10% of the company's issued share capital.

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    Question: 5

    Statement I- Power to grant relief from oppression/mismanagement which were vested by section 402 of the 1956 Act in High Court have now been transferred to the National Company Law Tribunal by section 242 of the 2013 Act.
    Statement II - Section 242 does not empower National Company Law Appellate Tribunal to grant relief by way of prevention of apprehended mismanagement of the company due to material change which has taken place in its management or control.

    Updated On: Jan 13, 2026
    • Statement I is untrue
    • Statement II is untrue
    • Both Statements I and II are untrue
    • Both Statements I and II are true
    Show Solution

    The Correct Option is C

    Solution and Explanation

    Statement I is true. Statement II is false because Section 242 permits the NCLT to provide relief for perceived mismanagement, thus option (B) is the correct answer.
    The correct answer is (C): Both Statements I and II are false.

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    Top Questions on Company Law

    Questions Asked in CLAT PG exam

    Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
    I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
    [Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
    View Solution
    The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
    Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
    If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
    [Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
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    The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
    Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
    [Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
    View Solution
    In its second preliminary objection, Myanmar submits that The Gambia’s Application is inadmissible because The Gambia lacks standing to bring this case before the Court. In particular, Myanmar considers that only “injured States”, which Myanmar defines as States “adversely affected by an internationally wrongful act”, have standing to present a claim before the Court. In Myanmar’s view, The Gambia is not an “injured State” (a term that Myanmar appears to use interchangeably with the term “specially affected State”) and has failed to demonstrate an individual legal interest. Therefore, according to Myanmar, The Gambia lacks standing under Article IX of the Genocide Convention.
    Myanmar draws a distinction between the right to invoke State responsibility under general international law and standing before the Court. It argues that, even if it were established that a “non-injured” Contracting Party to the Genocide Convention has the right to invoke another State’s responsibility for violations of the Convention, this would not necessarily entail the right to bring a case before the Court. To this end, Myanmar contends that there exists a difference between the common interest in the accomplishment of the purposes of the Genocide Convention and a State’s individual legal interest that may be enforce through the institution of proceedings before the Court. In Myanmar’s view, only States “specially affected” by an internationally wrongful act have standing to bring a claim before the Court.
    Myanmar further submits that The Gambia’s claims are inadmissible in so far as they are not brought before the Court in accordance with the rule concerning the nationality of claims which, according to Myanmar, is reflected in Article 44 (a) of the International Law Commission’s Articles on the Responsibility of States for Internationally Wrongful Acts. Myanmar asserts that the rule concerning the nationality of claims applies to the invocation of responsibility by both “injured” and “non injured” States and irrespective of whether the obligation breached is an erga omnes partes or erga omnes obligation. Consequently, in Myanmar’s view, The Gambia lacks standing to invoke Myanmar’s responsibility.
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