Breach of contract of supply by one of the consortium member is not oppressiona & mismanagement

Last updated: 24 November 2022

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Quick Summary

This judgement clarifies that a simple breach of a supply contract by a consortium member does not constitute oppression or mismanagement under Sections 397 and 398 of the Companies Act, 1956. The Supreme Court found that the petitioner, who was actively involved in the company's operations and approved payments, could not later claim mismanagement due to the breach. Such issues are typically matters for breach of contract claims, not company law remedies.

Court :
Supreme Court of India

Brief :
On an overall analysis of the facts involved and the part played by the Petitioner No.2 in the affairs of the Company at the relevant time, we are not inclined to interfere with the orders of the High Court or the Company Law Board, since we are not satisfied that any act of oppression or mismanagement within the meaning of Sections 397, 398, 402 and 403 of the Companies Act, 1956, has been made out by the Petitioners against the majority shareholders of the Respondent No.1 Company which would justify the making of a winding up order on the ground that it would be just and equitable to do so and to pass appropriate orders to bring to an end the matters complained of.

Citation :
Special Leave Petition No.9110 of 2008

Daily Limit Reached