The rule of foss v s harbottle

Wrongdoers are in control of the company Control of a majority of the voting shares was believed to be necessary to bring a derivative action.

Harbottle cannot be applied mechanically in India. They asked that the guilty parties be held accountable to the company and that a receiver be appointed.

If it is right that the law has conferred or should in certain restricted circumstances confer further rights on a shareholder the scope and consequences of such further rights require careful consideration. If an individual shareholder seeks to bring such a complaint, he should do so by bringing it before a general meeting and persuade other shareholders to adopt the course of action he thus proposes.

The Court rejected the two shareholders' claim and held that a breach of duty by the directors of the company was a wrong done to the company for which it alone could sue.

Harbottle even with its 'exceptions' stultifies minority shareholder action against corporate mischief. Nageshwara Rao, the Supreme Court ruled that the courts in general will not intervene at the instance of shareholders in the matters of internal administration and management of the company by the directors so long as they act within the powers bestowed on them by the articles of the Company.

Harbottle and the exceptions to it. The majority cannot appropriate either the property of the company or the interest of the minority shareholders, which includes appropriating property to another company where majority shareholders are in control and passing resolution for compulsory acquisition of shares of minority shareholders, respectively.

foss vs harbottle in company law
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Foss v Harbottle