I am a director and shareholder in a company and my co-founder is diverting company funds to his personal account. What legal remedy do I have?
RE Asked by Rekha Pandey from India
Quick Answer
Under Section 339 of the Companies Act 2013, if the affairs of the company are being conducted fraudulently or with intent to defraud creditors or members, you can approach the NCLT for appropriate relief including directing investigation.
Detailed Legal Analysis
Under Section 339 of the Companies Act 2013, if the affairs of the company are being conducted fraudulently or with intent to defraud creditors or members, you can approach the NCLT for appropriate relief including directing investigation. Under Section 241-242, you can file a petition for oppression and mismanagement before the NCLT if you hold at least 10% of the issued share capital, which applies to diversion of company funds.
You can also file a complaint under Section 447 of the Companies Act 2013 for fraud, which provides for imprisonment from six months to ten years and a fine, if the diversion constitutes fraud. The Serious Fraud Investigation Office (SFIO) can be directed to investigate under Section 212 if the matter involves serious fraud.
Additionally, you can file a criminal complaint under Section 403 and 405 of the Indian Penal Code for criminal misappropriation and criminal breach of trust. You should collect documentary evidence of the fund diversion such as bank statements, board minutes, and accounting records before initiating action.
Legal Provisions Referenced
Verify the current statutory text at India Code (the official repository of Indian legislation) or the Legislative Department. This answer is general legal information, not advice on your specific matter.
Disclaimer: AI-generated for educational purposes only. Does not constitute legal advice. Consult a qualified practitioner.