Company Law: Central Government Power to Prevent Oppression and Mismanagement

Under Sec. 408 of the Companies Act, 1956, the Central Government of India possesses special powers to reduce oppression and mismanagement in a company. As per Sec. 397 and 398, a certain number of members can lodge a complaint and ask for relief against oppression and mismanagement.

Company Law: Central Government Power to Appoint Directors

The Central Government is authorized to appoint the director of a company as specified by the National Company Law Tribunal (NCLT), to protect the interests of shareholders and the company as a whole to reduce oppression and mismanagement. Such directors have tenure of three years. The Central Government appoints such directors when referred by the NCLT after necessary enquiry or on complaint by the requisite number of members.

These directors need not hold qualification shares and they shall also not retire by rotation. However, the Central Government is also authorized to remove or change these directors.

Central Government: Power to Give Direction

When the Central Government appoints directors of a company it may also give directions to carry out company’s affairs, such as replacing the auditor or altering the Articles of the company.

Central Government: Power to Ask for Report

The Central Government may also ask for reports from the directors appointed by it, regarding the affairs and functioning of the company.

Central Government: Power to Remove Managerial Personnel

Under Sections 388-B to 388-E, the Central Government is empowered to remove managerial personnel by the reference of the Company Law Board.