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    Question

    In the landmark caseĀ Tata Sons Limited v. Cyrus Mistry

    (2018), the Supreme Court addressed the rights of minority shareholders and the concept of fiduciary duty owed by majority shareholders. The Court established principles regarding oppression and mismanagement under the Companies Act. Which principle was established?
    A Majority shareholders have absolute rights over company affairs and minority shareholders have no remedy for oppression. Correct Answer Incorrect Answer
    B Majority shareholders owe a fiduciary duty toward minority shareholders, and conduct that oppresses minority rights can be challenged under oppression provisions. Correct Answer Incorrect Answer
    C A director cannot be removed even if their removal is in the company's interest if the majority opposes removal. Correct Answer Incorrect Answer
    D Minority shareholders cannot seek relief for mismanagement unless they own at least 25% of shares. Correct Answer Incorrect Answer
    E The controlling family of a company cannot make decisions contrary to company's interest if minority shareholders object. Correct Answer Incorrect Answer

    Solution

    In Tata Sons v. Cyrus Mistry, the Supreme Court held that majority shareholders owe a fiduciary duty toward minority shareholders, similar to directors' duty toward the company. The judgment established that oppressive conduct by majority shareholdersā€”conduct that unfairly prejudices minority interestsā€”can be remedied under Section 398 of the Companies Act (oppression). The Court clarified that while majority has governance rights, these rights must be exercised in a manner that does not illegally or oppressively harm minority interests. This landmark decision has become foundational in protecting minority shareholder rights and establishing the principle of shareholder rights balance.

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