It is really very difficult to codify the powers of the Tribunal under section 397/398 of the Act. Obviously, the Tribunal has wide powers or powers to pass such orders in order to put an end to the matters complained of. While all the sections under the chapter deal with the powers of the Tribunal in an application under sections 397/398 of the Act, prominently, sections 397, 398, 402 and 402 deals with the power of the Tribunal. Without prejudice to the powers conferred on the Tribunal under section 397/398, section 402 confers certain powers expressly as follows:
(a) the regulation of the conduct of the company’s affairs in future.
(b) The purchase of the shares or interests of any members of the company by other members thereof or by the company.
(c) In the case of a purchase of its shares by the company as aforesaid, the consequent reduction of it share capital.
(d) The termination, setting aside or modification of any agreement, howsoever arrived at, between the company on one hand, and any of the following persons, on the other namely: -
(i) the managing director,
(ii) any other director,
(iii) and (iv)----
(iv) the manager,
upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in all the circumstances of the case.
(e) the termination setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, setting aside or modified except after due notice to the party concerned and provided further hat no such agreement shall be modified except after obtaining the consent of the party concerned,.
(f) the setting aside of any transfer, delivery f goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference.
(a) Any other matter for which in the opinion of the Tribunal it is just and equitable and provision should be made.”
Further, other sections under the Chapter confer certain powers upon the Tribunal as follows:
Section 403 - The section confers power on the Tribunal to pass interim orders.
Section 404 - Effect of the order altering the memorandum and article which implies the power of the Tribunal to modify memorandum and articles of association of a company.
Section 405 - Power to add certain respondents in an application under section 397/398 of the Act.
Section 406 - The section says that, in relation to an application under section 397 or 398, sections 539 to 544 both inclusive, shall apply in the form set forth in Schedule XI.
By reading section 397, 398, 402, 403, 404, 405 and 406, and Schedule XI, with regard to the powers exercisable by the Tribunal under section 397/398; the following points emerge for consideration.
(1) The nature of powers passed by the Tribunal under sections 397/398 is preventive in nature normally except to a very limited extent.
(2) The Tribunal will have unfettered freedom in passing any interim or final orders under section 397/398 of the Act adhering to the basic principles for putting an end to the matters complained of.
(3) The orders that can be passed solely based on the sections 397/398 of the Act can not be put to precise.
(4) The power of the Tribunal under other sections under the chapter will be in addition to the powers exercisable by the Tribunal under sections 397/398 of the Act.
(5) While it is true that the Tribunal is conferred with certain specific powers under section 402 in addition other powers under section 397/398, the exercise to be done carefully. The stress to be laid on clause (f) which restricts the power of the Tribunal while setting aside any agreement or otherwise.
(6) Even section 402 confers ample power on the Tribunal to pass such orders if the Tribunal feels the same as just and equitable.
(7) Schedule XI of the Act confers certain additional powers like penalty for falsification of books, penalty for frauds by officers, liability where proper accounts not kept, liability for fraudulent conduct of business, power of the Tribunal to assess damages against delinquent directors etc. But, in practice, though certain other incidental or consequential powers are conferred on the Tribunal by virtue of section 406, the Tribunal may concentrate on advancing the object of the chapter by passing such orders in order to put an end the matters complained of. The Tribunal may resort to purposive interpretation while dealing the issues under the chapter.
(8) Though, the precedents on sections 397/398 gives an understanding as to the powers exercisable by the Tribunal under the chapter, the powers of the Tribunal can not be codified.
(9) To conclude, the Tribunal will have ample powers for putting an end the matters complained of or for advancing the object of the chapter.