Companies Act Section 244

Companies Act, Section 244: Right to Apply under Section 241

Section 244 of the Companies Act, 2013 specifies the eligibility criteria for members of a company who are entitled to apply to the National Company Law Tribunal (NCLT) under Section 241. Section 241 allows members to seek relief in cases where the affairs of the company are being conducted in a manner that is prejudicial to public interest or oppressive to the interests of its members. This section ensures that the rights of shareholders or members to initiate proceedings before the Tribunal are clearly defined based on their ownership stake in the company.

1. Eligibility Criteria for Members to Apply

The first sub-section of Section 244 sets out the conditions under which members of a company are entitled to file an application under Section 241. These conditions vary depending on whether the company has a share capital or not.

(a) For Companies with Share Capital

In the case of companies that have share capital, the members eligible to apply to the Tribunal must meet one of the following criteria:

Not less than 100 members of the company, or
Not less than one-tenth of the total number of members of the company (whichever is less), or
Any member or members holding not less than one-tenth of the issued share capital of the company.
However, there is an important condition attached to this eligibility:

The applicant(s) must have paid all calls and other sums that are due on their shares. This means that the applicant(s) must be fully paid-up members with no outstanding dues on their shares at the time of making the application.
(b) For Companies Without Share Capital

In the case of companies that do not have share capital (such as non-profit organizations or mutual benefit societies), the eligible members must be at least:

One-fifth of the total number of members of the company.
This ensures that a significant portion of the membership is represented in the application, preventing frivolous or unrepresentative claims.

Provision for Waiver of Requirements

Tribunal’s Discretion:
The Tribunal has the power, upon receiving an application, to waive all or any of the above requirements (whether from clause (a) or clause (b)), allowing members who do not meet the full criteria to still make an application under Section 241. This flexibility enables the Tribunal to accommodate situations where strict adherence to these criteria may be unfair or impractical.
Explanation of Joint Shareholders

Joint Shareholders:
For the purpose of determining eligibility under clause (a) or clause (b), if a share is held by two or more persons jointly, they will be counted only as one member. This is important because it prevents joint shareholders from being counted multiple times when calculating whether the required number of members (or shares) have agreed to file an application.
2. Filing an Application on Behalf of Others

Sub-section 2 allows for representative applications by members who are entitled to file under Sub-section 1.

Consent of Members:
If any member or members are entitled to make an application under Sub-section (1), they may apply on behalf and for the benefit of all other eligible members, provided they obtain the written consent of the rest of the eligible members.
This provision enables a collective approach to the application, where one or a few members can represent the interests of all those eligible, streamlining the process and preventing the need for multiple applications.