Question

In the following question, a Statement is followed by two Conclusions, I and II.
Statement: Allegations have been made by the Minority Shareholders that ABC's promoters sold the optionally convertible preference shares and redeemable preference shares to a trust controlled by ABC's promoters at prices significantly below their fair market value, thereby causing a financial loss to ABC and its shareholders. What is the recourse for minority shareholders under law?
Conclusion I: The Minority Shareholders can file for class action under Section 245 of the Companies Act, 2013, seeking directions from NCLT to either reverse the sale of optionally convertible preference shares and redeemable preference shares or to compensate the Minority Shareholders.
Conclusion II: The aggrieved members may proceed individually to protect their rights against acts of oppression or mismanagement under Section 241 of the Companies Act, 2013.
In the context of the above Statement and Conclusions, which one of the following is correct?

• A. Neither Conclusion I nor II follows
• B. Both Conclusions I and II follow
• C. Only Conclusion I follows
• D. Only Conclusion II follows

Hint:

Remember: "Class Action" (Section 245) is for collective redress, while "Oppression and Mismanagement" (Section 241) is a broader remedy for protecting minority interest. Both are powerful tools for shareholders against promoters!

Answer 1

The Correct Option is B

Step 1: Understand the dispute.
Minority shareholders of ABC say the promoters sold certain preference shares to a promoter-controlled trust far below fair value, hurting the company and shareholders. We must judge two suggested remedies under the Companies Act, 2013.

Step 2: Look at Conclusion I.
Conclusion I says they can file a class action under Section 245 before the NCLT, asking to reverse the sale or to compensate the shareholders. Section 245 indeed allows members to act collectively and seek such relief against acts prejudicial to the company. So Conclusion I is a valid recourse.

Step 3: Look at Conclusion II.
Conclusion II says aggrieved members may approach the NCLT under Section 241 for oppression and mismanagement. Section 241 is the classic remedy where company affairs are run in a way prejudicial to members. So Conclusion II is also a valid recourse.

Step 4: Check both fit the facts.
Undervalued share transfers by promoters to their own trust is exactly the kind of prejudicial conduct that both Section 245 (class action) and Section 241 (oppression and mismanagement) are meant to address.

Step 5: Decide which conclusions follow.
Since both Section 245 and Section 241 give genuine legal remedies here, both Conclusion I and Conclusion II follow.

Step 6: Eliminate the other options.
Neither follows, only I follows, and only II follows are all wrong, because we have shown both conclusions are correct.

Step 7: Final answer.
\[ \boxed{\text{Both Conclusions I and II follow}} \]