Two companies ‘A’ and ‘B’ were in rivalry. The majority members of ‘A’ Company were also members in ‘B’ company. By a resolution, ‘A’ company wanted an action against ‘B’ company. But the majority shareholders passed a resolution adverse to the company. What is the remedy to the minority share holders?
If the conduct of majority shareholders constitutes a fraud or oppression on the minority, then it can be impeached as discriminatory action and the minority shareholders can sue for such fraud / oppression committed on the minority.
In the above case, since the majority members of ‘A’ company were also members in ‘B’ company, to protect their interests in ‘B’ company, they passed a resolution against any action against ‘B’ company. This is a clear case of fraud/ oppression on the minority share holders of the company and hence the resolution is invalid.
The same view was held in Menier Vs. Hoopers Telegraph Works, wherein the Court held that the resolution was invalid because it affected the minority interests.Generally the court does not interfere in the Company’s affairs. But in cases of clear oppression of minority and lack of good faith, the court will interfere.
(Also Please Refer Problem No.22)