Section 242(2) of the Companies Act, 2013 ("the Act") lists the orders that the NCLT may make once it has formed the opinion required by Section 242(1). The list is not exhaustive, but it is structured, and the most significant reliefs are the regulation of the company's affairs, the purchase of shares, and the termination or modification of agreements.
The Buy-Out Order
The buy-out order under Section 242(2)(b) is the most commonly sought relief in an oppression petition. It permits the Tribunal to order the purchase of the shares or interests of any member by the company or by another member. The order may be made on such terms and conditions as the Tribunal thinks fit, including the price and the timing of payment.
The NCLAT has held that a buy-out order cannot be made without a prior finding of oppression and mismanagement and satisfaction of the Section 242(1) conditions. The buy-out is not a standalone remedy; it is a consequence of a finding that the affairs of the company are being conducted in an oppressive manner and that winding up would unfairly prejudice the member.
The Regulation of Affairs
Section 242(2)(a) permits the Tribunal to regulate the conduct of the company's affairs. This is a broad power, and it has been used to restrain the board from taking specified actions, to require the holding of meetings, and to direct the appointment of observers. The power is not a licence for the Tribunal to manage the company; it is a power to correct the conduct that has been found to be oppressive.
The Winding Up Alternative
Section 242(1)(b) contemplates a winding-up order where the facts would justify winding up on the just and equitable ground but winding up would unfairly prejudice the member. The Tribunal's power to wind up under Section 242 is an alternative to the just and equitable winding up under Section 271, and it is available only where the statutory conditions are satisfied.
The NCLT Amaravati has held that a petition that seeks winding up as the principal relief, rather than as an alternative under Section 242(1)(b), is not maintainable as an oppression petition. The remedy is preventive, not a substitute for a winding-up petition.
The Limits
The Section 242 powers are remedial, not punitive. They are designed to bring an end to the matters complained of, not to punish the majority. A petitioner who seeks damages or compensation for past conduct may need to pursue a separate civil action.
Call to Action
Anuj Desai & Associates advises petitioners and companies on the scope of Section 242 reliefs—from the buy-out order and the valuation process to the regulation of affairs and the winding-up alternative. If you are seeking or opposing a Section 242 order, we can help you frame the relief.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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