A Class Action is one where a class or group of people with a common grievance
join hands to seek relief. It is a cost effective procedural device whereby few
people can sue for the advantage of a larger group. The concept of a class
action has been part of the legal system of other countries since decades.
However, this tool was not available to the stakeholders in India until the
introduction of the Companies Act, 2013. This is the new provision inserted
under Companies Act, 2013. The Companies Act, 2013 provides for class‐action
lawsuits, which can allow a large number of people with common interest in a
matter to sue or be sued as a group. Sections 245 and 246 of the Act contain
Under these, class‐action suits may be filed by investors if they are of the
opinion that the affairs of the company are being conducted in a manner
prejudicial to the interest of the company, its shareholders or depositors.
The concept of Class action suits did not originate in India. It stems from the
US, where it was introduced in the year 1983. The 'Class Action', which is also
known as 'Representative Action', is actually a form of lawsuit where a large
group of people collectively brings a claim to the court through a
What Is Section 245
Section 245 of the companies Act, 2013 notified on 1st June, 2016 contains the
concept of class action, wherein the neighboring provisions have been made with
a similar objective i.e. protection of interests of stakeholders. Section 245
given a right to members and depositors of the company to collectively approach
Tribunal (NCLT) to initiate Class Action against the company, the directors,
auditors, or any advisor or expert who engage in any wrongful, unlawful and
fraudulent act or omission or conduct on their part in relation to a company.
Who Can Initiate
- In case of a company having share capital, the action may be brought by:
Not less than 100 shareholders of the company, or not less than a prescribed
percentage of the total number of its members.
Any member or members holding not less than a prescribed percentage of the
issued share capital of the company, subject to the condition that the applicant
or applicants have paid all calls and other sums due on his or their shares.
- In case of a company not having share capital, the action must be
brought by not less than one fifth (1/5) of the total number of
Not less than 100 depositors of the company, or not less than a prescribed
percentage of the total number of depositors (whichever is less) or any
depositor or depositors to whom the company owes a prescribed percentage of
total deposits of the company.
Section 245 of the Act clearly indicates the importance given to the minority
shareholders and the depositors who also are very important stakeholders, and
whose views and decisions are most often overlooked. It can be said that this
provision is a means to ensure there is no tyranny of the majority, whereby in
the interests of the minority are adversely affected.Written By: Shubham Parashar