Prevention of oppression and mismanagement is a concept that is incorporated in the Companies Act, 2013. In order to understand the steps that are to be taken under the Companies Act, 2013, we must understand the meanings of oppression & mismanagement and their need to be prevented.
Oppression in the Companies Act rin the Companies Act refers to the overuse or misuse of authority. This misuse of authority is such that that there exists an exploitative relation that is inhumane. Further, oppression could be a policy or practice of a company that has caused agony or sorrows to one or more individual hence affecting their physical or mental health for the negative.
Mismanagement in the Companies Act refers to a situation where the companies indulge in activities that may violate public policy or be of great harm to the general public. Both Oppression and Mismanagement need to be prevented and hence the Companies Act, 2013 provides for the right to complain against such forbidden or untoward processes that lead to the harm of society.
Section 397 of the Companies Act, 2013, deals with the prevention of oppression. The members of the company have the right to apply for the same. In order to receive relief, certain conditions need to be fulfilled. Firstly, there must be oppression in the truest sense of the term. This means that there must be a clear misuse or abuse of power that has shattered the faith of the shareholders or put them at risk. The ordinary membership rights of a member must be subjected to deprivation. Secondly, the facts and circumstances of the case must be such that the winding up of the company is equitable. Further, oppression must necessarily and explicitly be mentioned in the arguments. Thirdly, the person complaining of the oppression should have done nothing on his or her part that was not correct and which causes any sort of false blame on the company. Lastly, an act, though oppressive if done once itself, must be of a continued nature for a relief to be granted to the plaintiff.
Section 398 of the Companies Act, 2013, deals with the prevention of mismanagement. This application of mismanagement must be mandatorily notified to the Central Government. Further, the Tribunals have the power to take the necessary decisions regarding the prevention of mismanagement when the plaintiff has alleged a problem of mismanagement.
The Prevention of oppression and mismanagement is immensely important and significant, especially in the current times. Any situation of power and authority vested in a small group of people can subsequently be used for exploitative purposes resulting in the abuse of authority that directly affects the other members of the company. In such a situation, the member faces the grave consequences which are often seen to be a deterioration in the physical or mental health of the individual which is extremely perilous. Such a negative working atmosphere will also result in the blatant violations of human rights amongst other problems and these members need protection from this misuse of power in future situations.