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: Read the facts.
Minority shareholders allege that ABC's promoters sold certain preference shares to a trust they control, at prices far below fair value, causing loss to the company and its shareholders. We must judge whether both stated remedies, class action under Section 245 and oppression and mismanagement under Section 241, are available.

Step 2: Understand the protection given.
The Companies Act, 2013 protects minority shareholders from unfair acts by promoters or management. Where company affairs are run in a prejudicial or oppressive way, the law gives both collective and individual remedies.

Step 3: Look at the alleged wrong.
The promoters allegedly moved securities to a trust controlled by themselves at prices well below fair value. This may be a misuse of managerial power and may harm the interests of minority shareholders.

Step 4: Check Conclusion I, Section 245.
Section 245 lets members file a class action before the NCLT when company affairs are conducted in a manner prejudicial to the company or its members. The facts fit, so Conclusion I follows.

Step 5: Check Conclusion II, Section 241.
Section 241 lets members approach the NCLT when affairs are conducted oppressively or prejudicially. Undervalued transfers benefiting promoters at the cost of shareholders may amount to oppression or mismanagement, so Conclusion II also follows.

Step 6: Conclude.
Both remedies are available, so both conclusions follow.
\[ \boxed{\text{Both Conclusions I and II follow}} \]