An oppression and mismanagement petition is the main remedy for shareholders who are being treated unfairly by those who control a company: removed from the board, diluted by new share issues, kept in the dark about accounts, or watching the business being run for others' benefit. But not every shareholder can file one. Section 244 of the Companies Act, 2013 sets a threshold, often called the 10% rule, designed to stop very small shareholders from bringing petitions that disrupt the company.
This guide explains the threshold in detail, how it is counted, how several shareholders can combine to meet it, when the NCLT will waive it, and what else a petitioner must show. It is written for shareholders considering a petition and for companies facing one.
हिंदी में सारांश
कंपनी अधिनियम की धारा 244 के तहत, शेयर पूंजी वाली कंपनी में उतà¥à¤ªà¥€à¤¡à¤¼à¤¨ (oppression) और कà¥à¤ªà¥à¤°à¤¬à¤‚धन की याचिका वे सदसà¥à¤¯ दायर कर सकते हैं जो कम से कम 100 सदसà¥à¤¯ या कà¥à¤² सदसà¥à¤¯à¥‹à¤‚ का 10% हों (जो à¤à¥€ कम हो), या जिनके पास जारी शेयर पूंजी का 10% हो, बशरà¥à¤¤à¥‡ शेयरों पर सà¤à¥€ बकाया à¤à¥à¤—तान हो चà¥à¤•à¥‡ हों। NCLT इस शरà¥à¤¤ में छूट (waiver) à¤à¥€ दे सकता है। कई छोटे शेयरधारक मिलकर यह सीमा पूरी कर सकते हैं।
The rule at a glance
Two tests for companies with share capital
At least 100 members or 10% of the members, whichever is less; or members holding at least 10% of the issued share capital.
Calls must be paid
The petitioners must have paid all calls and other sums due on their shares.
Companies without share capital
At least one-fifth of the total number of members.
Shareholders can combine
Several shareholders can join one petition to meet the threshold, with written consent.
The NCLT can waive it
Under the proviso to Section 244(1), the tribunal can waive any of the requirements.
Meeting the threshold is only the start
The petitioner must still show oppression or mismanagement on the facts.
Counting the threshold
For a company with share capital, there are two alternative tests. The number test asks whether the petitioners are at least 100 members or one-tenth of the total number of members, whichever is less. In a private company with five shareholders, one shareholder is 20% of members and meets this test. The capital test asks whether the petitioners hold at least one-tenth of the issued share capital. In both cases, they must have paid all calls and other sums due on their shares.
The tests are applied on the date of filing. Members are those whose names are on the register of members; a person who claims shares but has not been registered may first need rectification of the register. Heirs of a deceased shareholder whose shares have not yet been transmitted face a similar question, and tribunals have taken different views depending on the facts. Shares held jointly are usually counted once, through the first-named holder.
Several shareholders can file together, each signing the petition or giving written consent, to meet the threshold. If some later withdraw, tribunals have generally held that the petition, validly filed, does not fail automatically.
How to check eligibility before filing
Get the register of members
Obtain the current register or the latest annual return (MGT-7) showing shareholders and holdings.
Count members and capital
Work out the number of members and the issued share capital, and your share of each.
Check calls are paid
Confirm that all calls and sums due on your shares have been paid.
Find co-petitioners if needed
If you fall short, identify other shareholders who share your concerns and are willing to join.
Consider a waiver application
If you still fall short, prepare an application for waiver with reasons.
Build the case on the facts
Collect evidence of the conduct complained of, because eligibility alone does not win the case.
When the NCLT waives the threshold
The tribunal can waive the requirements on an application. There is no fixed list of grounds. Tribunals have considered whether the applicant has a real and substantial interest in the company, whether the complaint is genuine rather than vexatious, whether the issues affect shareholders generally, and whether the applicant would otherwise be left without a remedy.
The best-known waiver case concerned Cyrus Investments and the Tata group, where the NCLAT in 2017 granted a waiver to companies holding less than 10% of Tata Sons' issued share capital, recognising their substantial economic interest. In smaller companies, waivers have been granted, for example, to founders diluted below 10% by the very acts they complain of, and to heirs whose holding was below the threshold. A waiver application should be filed with, or before, the petition, and argued on its own merits.
Threshold examples
| Company | Petitioner | Meets the threshold? |
|---|---|---|
| Private company, 6 members, petitioner holds 5% | 1 of 6 members (about 17%) | Yes, by the number test |
| Private company, 300 members, petitioner holds 4% | 1 member; 4% of capital | No; may need co-petitioners or a waiver |
| Public company, 5,000 members | 120 members acting together | Yes, by the number test (100 members) |
| Company with share capital, unpaid calls on petitioner's shares | Holds 15% | Not until calls are paid, unless waived |
| Section 8 company without share capital, 50 members | 12 members | Yes, as one-fifth is 10 members |
What oppression and mismanagement mean
Once eligibility is met, the petitioner must show that the company's affairs are being conducted in a manner prejudicial to public interest, or prejudicial or oppressive to the petitioner or other members, or prejudicial to the company's interests, or that a material change in management or control is likely to cause prejudice. In Tata Consultancy Services v Cyrus Investments (2021), the Supreme Court emphasised that the conduct must be burdensome, harsh and wrongful, and that the remedy is not meant for every disagreement or loss of a board seat.
In closely held companies that work like partnerships, tribunals look at whether there was an understanding of mutual trust and participation, and whether it has broken down. Common grounds include exclusion from management, dilution without a business reason, diversion of business, siphoning of funds and denial of information. See oppression and mismanagement.
A founder diluted below the line
Here's a made-up example. A co-founder of a Bengaluru start-up held 18% of its shares. In a new round approved at a short-notice meeting, the company issued shares only to investors, reducing his stake to 7%. When he filed an oppression petition, the company argued that he no longer held 10%.
He applied for a waiver at the same time. The NCLT noted that the very acts complained of had reduced his holding, that he had been a founder and director, and that his grievance was genuine. It granted the waiver, and the petition proceeded.
Small shareholders combine
Here's a second made-up example. Fourteen shareholders of a Kolkata investment company, each holding between 0.5% and 1.5%, together held 11% of the issued share capital. They were concerned about loans to companies connected with the majority. Together, they met the capital test and filed a joint oppression petition, each signing the petition and the vakalatnama. The NCLT accepted the petition as maintainable and directed a special audit of the loans.
Eligibility checklist
- Get the latest register of members or MGT-7
- Count the total members and your number among them
- Calculate the issued share capital and your holding
- Confirm all calls on your shares are paid
- Confirm your name is on the register; if not, consider rectification first
- Identify co-petitioners if needed, with written consent
- Prepare a waiver application if you still fall short
Class actions as an alternative
Where many members or depositors are affected by the same conduct, a class action under Section 245 may be an alternative or addition to an oppression petition. It has its own thresholds, set by the rules for different kinds of companies, and allows the tribunal to restrain the company and award damages against directors, auditors and advisers. For small shareholders in larger companies who cannot meet the Section 244 threshold, a class action with others may be the more realistic route. See class action under Section 245.
Key rulings on eligibility and oppression
| Case | What it decided |
|---|---|
| Cyrus Investments v Tata Sons (NCLAT, 2017) | Granted a waiver of the 10% threshold to petitioners with substantial economic interest |
| Tata Consultancy Services v Cyrus Investments (2021) | Oppression requires conduct that is burdensome, harsh and wrongful; not every grievance qualifies |
| Needle Industries v Needle Industries Newey (1981) | Classic statement of oppression and the tribunal's wide powers to remedy it |
Timing and delay
There is no fixed time limit in Section 241 itself, but tribunals have applied the Limitation Act to oppression petitions, generally three years, while treating continuing acts of oppression differently. More importantly, delay weakens a case in practice. A shareholder who knew of an allotment or removal and did nothing for years may be seen as having accepted it, and third parties may have acquired rights in the meantime. File promptly after the conduct complained of, and seek interim relief early if the other side can make further changes.
Frequently Asked Questions
What is the 10% rule?
For companies with share capital, petitioners must be at least 100 members or 10% of members (whichever is less), or hold 10% of the issued share capital.
Can a shareholder with less than 10% file?
Yes, by joining with others to meet the threshold, or by applying for a waiver.
What about companies without share capital?
At least one-fifth of the total members can file.
Do unpaid calls matter?
Yes. Petitioners must have paid all calls and sums due on their shares, unless the requirement is waived.
When will the NCLT grant a waiver?
Where the applicant has a real and substantial interest and a genuine grievance; there is no fixed list.
Can heirs file an oppression petition?
It depends on whether they are on the register. They may need transmission or rectification first, or a waiver.
Is eligibility checked on the filing date?
Yes, generally.
Does meeting the threshold mean I will win?
No. You must still prove oppression or mismanagement on the facts.
Thinking of an Oppression Petition?
Send us the register of members and a note of what happened. We will check eligibility and tell you plainly whether you have a case.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Have a question about your own case?
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
