Oppression: the Concept

In one line

Oppression means conduct that is burdensome, harsh and wrongful to a member in his character as a member, involving at least a lack of probity or fair dealing towards his proprietary rights as a shareholder, shown by a consecutive story of acts continuing to the date of the petition, and not merely by a loss of confidence or a thwarted ambition for control.

In exam wording: on Shanti Prasad Jain v. Kalinga Tubes Ltd., it must be shown that the conduct of the majority shareholders was oppressive to the minority as members, that the events are considered not in isolation but as part of a consecutive story, that there were continuous acts continuing up to the date of the petition, that the conduct was burdensome, harsh and wrongful, and that the oppression involved at least an element of lack of probity or fair dealing to a member in the matter of his proprietary rights as a shareholder.

Why the law has this at all

The remedy did not begin as a remedy for oppression at all. It began as an escape from winding up.

At common law a member who could show that the substratum of the company had gone, or that mutual confidence in a quasi-partnership had broken down, could ask the court to wind the company up on the just and equitable ground. The difficulty was that the remedy destroyed what it protected. A solvent, profitable company would be liquidated because two families had quarrelled, and the petitioner's own shares would be worth less in a forced realisation than they had been the day before.

Shanti Prasad Jain sets out that history, and it is worth reproducing in an answer because it explains the shape of the whole Chapter. The Court records that the provision came for the first time in the Indian Companies Act 1913 as s.153C, and was based on s.210 of the English Companies Act 1948; that s.210 was introduced to give an alternative remedy to winding up in case of mismanagement or oppression; and that the reason was the feeling that though it might be just and equitable to wind a company up in view of the manner in which its affairs were conducted, it was not fair that the company should always be wound up for that reason, particularly when it was otherwise solvent, so that it would be better if the company was allowed to continue under such directions as the court may consider proper to give.

So the oppression jurisdiction is a remedial jurisdiction: its object is not to punish the majority but to bring the objectionable state of affairs to an end while keeping the company alive. Everything about the way the section is construed follows from that.