Section 242 of Companies Act 2013: Power of Tribunal
Section 242 gives the National Company Law Tribunal (NCLT) broad remedial powers when an application is made under Section 241 concerning oppression, mismanagement, prejudice to members, public interest or the interests of the company.
Updated: 17 September 2026
Meaning and scope of Section 242
Section 242 is the principal remedial provision that follows an application under Section 241 of the Companies Act, 2013. It empowers the Tribunal to fashion relief according to the circumstances of the case when the statutory requirements in Section 242(1) are met.
The expression "Tribunal" refers to the National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013. NCLT deals, among other matters, with disputes concerning oppression and mismanagement.
When can the Tribunal act under Section 242?
On an application under Section 241, the Tribunal may grant relief where it forms the opinion that both limbs of Section 242(1) are satisfied:
- the company's affairs have been or are being conducted in a manner prejudicial or oppressive to members, prejudicial to public interest, or prejudicial to the interests of the company; and
- winding up would unfairly prejudice the member or members concerned, although the facts would otherwise justify winding up on the just and equitable ground.
The statutory object is remedial: the Tribunal may make such order as it thinks fit with a view to bringing to an end the matters complained of.
Orders the Tribunal may make under Section 242(2)
The powers in sub-section (2) are without prejudice to the general power in sub-section (1). An order may address, among other matters:
- future regulation of the company's affairs;
- purchase of shares or interests by other members or by the company, including consequential reduction of share capital;
- restrictions on transfer or allotment of shares;
- termination, setting aside or modification of specified agreements;
- setting aside certain transactions amounting to a fraudulent preference;
- removal of the managing director, manager or directors;
- recovery and appropriate utilisation of undue gains made by managerial personnel;
- appointment of directors required to report to the Tribunal;
- costs; and
- any other matter for which the Tribunal considers it just and equitable to make provision.
Interim orders and fit and proper finding
Under Section 242(4), the Tribunal may, on the application of a party to the proceeding, make an interim order regulating the conduct of the company's affairs on terms and conditions that appear just and equitable.
Section 242(4A), inserted with effect from 15 August 2019, requires the Tribunal, at the conclusion of a case concerning Section 241(3), to record specifically whether the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of a company.
Effect on memorandum and articles
Where an order under Section 242(1) alters the memorandum or articles, the company cannot make an alteration inconsistent with that order without leave of the Tribunal, except to the extent permitted by the order. Alterations made by the Tribunal have effect as if duly made by the company under the Act.
A certified copy of an order under Section 242(1), and of every order altering or giving leave to alter the memorandum or articles where applicable, must be filed with the Registrar within the statutory period of thirty days.
Penalty for contravention of Section 242(5)
Under Section 242(8), contravention of sub-section (5) attracts a fine on the company of not less than Rs. 1 lakh and up to Rs. 25 lakh. Every officer in default is liable to a fine of not less than Rs. 25,000 and up to Rs. 1 lakh. The earlier imprisonment component was omitted with effect from 21 December 2020.
Section 242 - Power of Tribunal
(1) If, on any application made under section 241, the Tribunal is of the opinion -
(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
(2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for -
(a) the regulation of conduct of affairs of the company in future;
(b) the purchase of shares or interests of any members of the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;
(d) restrictions on the transfer or allotment of the shares of the company;
(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case;
(f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e):
Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned;
(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;
(h) removal of the managing director, manager or any of the directors of the company;
(i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
(j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h);
(k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct;
(l) imposition of costs as may be deemed fit by the Tribunal;
(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made.
(3) A certified copy of the order of the Tribunal under sub-section (1) shall be filed by the company with the Registrar within thirty days of the order of the Tribunal.
(4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be just and equitable.
(4A) At the conclusion of the hearing of the case in respect of sub-section (3) of section 241, the Tribunal shall record its decision stating therein specifically as to whether or not respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.
(5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.
(6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered.
(7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same.
(8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.
Related provisions
Section 242 should be read with Section 241 - Application to Tribunal for relief in cases of oppression, etc. and Sections 243 and 244 - consequences of certain orders and right to apply under Section 241.