NCLAT Upholds Waiver Allowing IMPPA Members To Pursue Oppression, Mismanagement Case

The National Company Law Appellate Tribunal (NCLAT) has upheld a waiver allowing members of the Indian Motion Picture Producers Association (IMPPA) to pursue an oppression and mismanagement case against the association, despite IMPPA's objection over the number of members supporting the petition.

A bench of Judicial Member Justice Sharad Kumar Sharma, Technical Members Arun Baroka and Indevar Pandey upheld the National Company Law Tribunal (NCLT), Mumbai's decision to grant the waiver. The bench held that the tribunal had properly exercised its discretion under Section 244(1)(b) of the Companies Act.

“The Learned Tribunal, it did prove the fact to justify the exercise of its discretion to initiate the proceedings under Section 241 and 242 of the Companies Act and while dealing with the specific pleading the Ld. Tribunal had taken into consideration the apparent act of mismanagement and oppression which were apparently made out for the purposes of grant of waiver,” the NCLAT observed.

The dispute arose from a petition filed by some IMPPA members on May 8, 2026. They alleged misuse and diversion of funds, lack of disclosure of expenditure, irregularities in circulation of notices and minutes, discrepancies in accounts, and illegal appointment of two senior vice presidents.

The members also alleged illegal suspension and expulsion of members. They sought relief under Sections 241 and 242 of the Companies Act, which provide the statutory remedy against oppression and mismanagement.

IMPPA opposed the maintainability of the petition. It argued that the members were required to meet the statutory threshold under Section 244 before pursuing the case.

Section 244(1)(b) requires members of a company without share capital to have the support of at least one-fifth of its members to apply under Section 241. Its proviso allows the tribunal to waive this requirement and enable members to pursue the proceedings.

The members relied on written consent from 209 members. They also relied on IMPPA's April 1, 2022 voters' list, which recorded 977 eligible voting members.

IMPPA took a different position. It claimed that the association had 26,000 members, of whom 1,250 were eligible to vote. On that basis, it argued that at least 250 members were required.

It further claimed that only 98 of the 209 members whose consents were relied upon were eligible voters. The remaining 111, it alleged, had not paid their annual fees.

The NCLAT rejected the challenge, relying on IMPPA's own April 1, 2022 voters' list. The bench noted that IMPPA had not challenged the validity of the list, which had been used for conducting its elections.

On that basis, the bench held that the consent of 209 members satisfied the statutory threshold under Section 244(1)(b). It also noted that the membership figures and the 209 consents had been pleaded in the original company petition.

IMPPA also alleged that some of the signatures on the consent letters were forged. It argued that the NCLT should have sent the documents for forensic or expert examination.

The NCLAT rejected this argument, holding that the burden of proving the allegation rested on IMPPA under Section 101 of the Evidence Act. The association had neither produced members who denied giving their consent nor made an effort to have the signatures independently verified.

The bench observed that IMPPA could not shift this burden to the tribunal by arguing that the NCLT should have acted on its own to verify the signatures.

The tribunal also rejected IMPPA's argument that the members had consented without properly applying their minds. It noted that the members had signed letters agreeing to initiate proceedings.

None of the consenting members had come forward before the tribunal to dispute the contents or validity of those letters, the bench noted.

It further relied on the Supreme Court's ruling in Cyrus Investments. The Supreme Court had held that a tribunal considering a waiver under Section 244 cannot decide the merits of the oppression and mismanagement case or other issues dependent on those merits.

The bench held that the NCLT had acted within those limits while granting the waiver. It found no legal or factual anomaly in the NCLT's order warranting interference.

The tribunal also observed that Section 244(1)(b) is intended to regulate access to the remedy and weed out frivolous litigation. It is not intended to operate as a deterrent to judicial remedies.