Section 402 – The Companies Act,1956

The Companies Act, 1956

402. Powers of [Tribunal] on application under section 397 or 398.

402. Powers of 1[Tribunal] on application under section section 397 or 398,.Without prejudice to the generality of the powers of the 1[Tribunal] under section 397 or 398, any order under either section may provide for

(a)the regulation of the conduct of the company’s affairs in future;

(b)the purchase of the 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)the termination, setting aside or modification of any agreement,

howsoever arrived at, between the company on the one hand; and any of the following persons, on the other, namely:

(i)the managing director,

(ii)any other director,

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(v)the manager,

upon such terms and conditions as may, in the opinion of the 1[Tribunal], be just and equitable in all the circumstances of the case;

(e)the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned;

(f)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 section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;

(g)any other matter for which in the opinion of the 1[Tribunal] it is just and equitable that provision should be made.

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When a direction for purchase of shares is given by the Court under section 402 and consequent reduction in share capital is to be effected, the procedure prescribed for reduction of share capital in sections 100 to 104 is not required to be followed; Cosmo Steels Pvt. Ltd. v. Jairam Das Gupta, 1978 (48) Comp. Cas. 312: AIR 1978 SC 375.

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1. Subs. by Act 11 of 2003, sec. 44, for “Company Law Board”. Earlier the words “Company Law Board” were substituted by Act 31 of 1988, sec. 67, for the word “Court” (w.e.f. 31-5-1991).

2. Sub-clauses (iii) and (iv) omitted by Act 53 of 2000, sec. 179 (w.e.f. 13-12-2000).

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