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

When promoters use their control over a company to push through a transaction that benefits themselves, here selling preference shares to their own trust well below fair value, minority shareholders are not left with just one narrow avenue of relief; Indian company law gives them more than one route depending on how they choose to frame the wrong.

Section 245 of the Companies Act, 2013 is built for situations where a group of members wants to act collectively against conduct that is prejudicial to the company or its shareholders, and it lets them approach the NCLT seeking damages or a reversal of the offending transaction, which is exactly what Conclusion I proposes: reversing the undervalued sale or compensating the shareholders for the loss it caused. Section 241 addresses a related but distinct wrong, prejudicial conduct in how the company's affairs are being run, commonly described as oppression or mismanagement, and it lets aggrieved members approach the NCLT on that separate footing, which is exactly what Conclusion II proposes.

These two sections are not mutually exclusive; a single set of facts, like a promoter-controlled trust receiving undervalued shares, can simultaneously support a class action for the financial harm caused and a separate application alleging that the company's affairs are being conducted in a manner oppressive to minority shareholders. Nothing in the facts here rules out either avenue, and nothing about invoking one avenue forecloses the other.

So both Conclusion I, the Section 245 class action, and Conclusion II, the Section 241 oppression and mismanagement remedy, are available and both follow from the statement.

Answer 2

A different way to test this is to examine what each section actually targets, class harm versus governance conduct, and confirm that the facts here trigger both targets independently rather than only one.

1. What Section 245 targets: It is aimed at giving members a collective, efficient mechanism to seek damages or reversal of a transaction that has caused loss to the company as a whole. The undervalued sale to a promoter-controlled trust caused exactly this kind of quantifiable financial loss to ABC and its shareholders, which fits Section 245's purpose directly, supporting Conclusion I.
2. What Section 241 targets: It is aimed at situations where the way a company's affairs are being conducted is prejudicial to members' interests or amounts to oppression, focusing on the pattern of governance conduct rather than a single transaction's financial effect alone. Promoters routing valuable shares to their own trust below market value is a clear instance of the company's affairs being run to benefit those in control at others' expense, which fits Section 241's purpose directly, supporting Conclusion II.
3. Do the two targets overlap or conflict: They address different aspects of the same underlying misconduct, financial harm on one hand and governance prejudice on the other, so invoking one does not use up or contradict the other. A member group can pursue both because the harm and the governance failing coexist on these facts.
4. Ruling either conclusion out: Since both sections independently apply on their own terms to this fact pattern, no principled basis exists to say only one of the two conclusions follows or that neither does.

Since Section 245 addresses the financial loss and Section 241 addresses the governance conduct behind that loss, and both are present on these facts, both conclusions follow together.

Therefore, the correct answer is Both Conclusions I and II follow.