Section 242 of the Companies Act 2013Section 242 of the Companies Act 2013Section 242 of the Companies Act 2013

Introduction

Tribunals are unique judicial bodies constituted to redress grievances in company law matters. Their decisions are practical and expeditious. 

Section 242 of the Companies Act, 2013, has vested this body with the power to pronounce decrees on issues related to company governance and management.

Purpose of Tribunals

Tribunals are intended to provide a faster process for addressing disputes than the conventional court process. 

They focus on company matters that transcend complexity, making it accessible and responsive to the needs of the stakeholders involved.

Powers of the Tribunal under Section 242

Section 242 outlines the powers the Tribunal exercises when handling cases concerning oppression and mismanagement. Among them include:

Regulating Company Affairs

This tribunal has all rights to issue orders governing the management of the company’s affairs so that its operations are conducted fairly and according to the rule of law.

Displacement of a Director

When the Tribunal believes that a director’s action is oppressive or contrary to the company’s interests, it can direct the removal of such a director from his position.

Appointment of Directors

If management stability is needed, the board can appoint new directors to manage the company and effectively govern it.

Compensation Orders

The Tribunal can order the company or concerned persons to make compensation to the aggrieved shareholders or stakeholders as redressal for wrongs committed by the company due to mismanagement.

Alteration of Memorandum and Articles

As a measure of protecting the shareholder’s interests, the Tribunal can alter the company’s memorandum or articles of association to provide scope for necessary changes in the governing structure.

Inspection of Books

The Tribunal can insist that the corporation open its books and records for inspection by interested persons to assure activity transparency.

Equitable Powers

The Tribunals may vest any further powers as may seem just and equitable to the Tribunal, thus allowing the rendering of judgments that would uphold justice and fairness as required in each situation.

Significance of Section 242

The powers granted under Section 242 are necessary for maintaining corporate governance pure. It plays an important role in enabling the Tribunal to take effective action against mismanagement and oppression because the power vested under it lets it:

Present the stakeholder – the intervention of the Tribunal under Section 242 ensures that minority shareholders and other stakeholders are protected from potential abuses of majority shareholders or management.

It encourages companies to conduct their business and record-keeping in a fair and transparent manner, since the company’s records can be inspected by the Tribunal.

Building Corporate Accountability: The powers of removal and appointment of directors and granting of compensation also underscore that the directors and managers are liable and responsible for their acts, and thus lead to responsible corporate behavior.

Conclusion

As a whole, Section 242 of the Companies Act 2013 enables the Tribunals to settle disputes and effectively ensure the fair working of companies. 

This specialised dispute resolution platform in the hands of Tribunals considerably safeguards the interest of the various stakeholders concerned, enhances the integrity of corporate governance, and facilitates swift justice in company-related matters. 

Legal advice needs to be sought for specific applications and interpretations of this section since the disputes involve complexity.

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