Question

Which of following is not a ground for compulsory winding up of a company

• A. Oppression of minority
• B. Loss of substratum
• C. Non-holding of annual general meeting
• D. Losses to the company

Hint:

Remember that the provisions for "Oppression and Mismanagement" were specifically created to provide a remedy to minority shareholders \textit{without} having to resort to the drastic step of winding up the company.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The question asks to identify which of the given options is not a valid ground for the compulsory winding up of a company by the Tribunal (now the National Company Law Tribunal, NCLT). These grounds were listed in Section 433 of the Companies Act, 1956 (and are now covered under the Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016).
Step 2: Detailed Explanation:
Let's analyze the grounds:
- Loss of substratum: This means the company has abandoned its main objects or is unable to achieve them. This falls under the "just and equitable" ground for winding up and is a valid reason.
- Non-holding of annual general meeting: Default in holding AGMs was a specific ground for winding up under the old Act.
- Losses to the company: Incurring losses is not, by itself, a ground for winding up. A company can be running at a loss and still be allowed to continue. However, if the losses lead to an inability to pay debts, that becomes a ground for winding up, but 'inability to pay debts' is the actual ground, not mere losses.
- Oppression of minority: This is a specific wrong dealt with under Sections 241-242 of the Companies Act, 2013 (formerly Sections 397-398 of the 1956 Act). The primary objective of these sections is to provide an \textit{alternative} remedy to winding up. The court will generally not order winding up if other remedies are available to end the oppression. Therefore, oppression itself is a ground for a separate petition for relief, not a direct ground for compulsory winding up.
Comparing the options, "Oppression of minority" is the most distinct ground which has its own specific remedy, making it not a primary ground for a winding-up petition.
Step 3: Final Answer:
Oppression of the minority is a ground for seeking relief under a separate provision of the Companies Act, which is intended as an alternative to winding up. The other options are more directly related to the traditional grounds for compulsory winding up. Therefore, option (A) is the correct answer.