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. Only Conclusion I follows
• C. Only Conclusion II follows
• D. Both Conclusions I and II follow

Hint:

Remember: Section 241 = Oppression and Mismanagement Section 245 = Class Action Both provisions are major minority-shareholder protection mechanisms under the Companies Act, 2013.

Answer 1

The Correct Option is D

Step 1: Break the facts into their legal core. Promoters sold optionally convertible and redeemable preference shares to a trust that they themselves control, at a price much lower than fair market value, causing loss to the company and its shareholders.

Step 2: Test Conclusion I against Section 245. Section 245 of the Companies Act, 2013 allows members to bring a class action before the NCLT when the company's affairs are run in a way prejudicial to the company or its members, and to ask the NCLT to restrain the wrongful act or to secure compensation. Selling shares far below fair value to a promoter-controlled trust fits this exactly, so Conclusion I follows.

Step 3: Test Conclusion II against Section 241. Section 241 lets a member approach the NCLT where the affairs of the company are conducted oppressively towards members or prejudicially to the company. The same undervalued sale, benefiting promoters at the shareholders' expense, is also classic oppression and mismanagement, so Conclusion II follows too.

Step 4: Combine the two results. Since the facts independently satisfy both Section 245 and Section 241, and Indian company law treats these as separate, non-exclusive remedies rather than alternatives, both conclusions are correct together.
\[ \boxed{\text{Both Conclusions I and II follow}} \]

Answer 2

A useful way to check statement-and-conclusion questions built around company law remedies is to ask what purpose each named section serves, and whether the facts trigger that purpose, rather than only checking the technical wording.

1. Neither Conclusion follows: This option would require the facts to fall completely outside both remedial schemes. A promoter diverting company securities to a self-controlled trust at a depressed price is exactly the kind of self-dealing both schemes exist to catch, so ruling out both is not supportable.
2. Only Conclusion I follows: Section 245's purpose is to give a collective, representative voice to members and depositors who are individually too small to fight a well-resourced promoter group, through a class action. That purpose is served here since the loss affects the shareholder body as a whole. But this option incorrectly assumes the individual remedy under Section 241 is unavailable at the same time, which is not the case.
3. Only Conclusion II follows: Section 241's purpose is to let an aggrieved member, or the requisite minimum group, seek relief directly against oppressive or prejudicial conduct by those in control, without needing to organise a wider class action. That purpose is equally served by these facts. But this option wrongly assumes the class-action route under Section 245 is closed, which the facts do not support either.
4. Both Conclusions I and II follow: Since the promoters' conduct serves both purposes at once, harming the company and members collectively, which satisfies Section 245's purpose, and being individually oppressive to shareholders, which satisfies Section 241's purpose, both statutory purposes are triggered simultaneously, and the Act does not force a choice between them.

Looking at what each section is designed to achieve, rather than treating them as mutually exclusive options, shows that this single set of facts activates both remedial purposes at once.

So the correct answer is Both Conclusions I and II follow.