ICP Investments v Uppal Housing: Pushing Shareholder Derivative Actions to the Brink

Abstract

ABSTRACT Although not codified under statute, the derivative action has been the mainstay of shareholder remedies for wrongs caused to the company. Conventional jurisprudence has recognized the derivative action under common law. However, the Delhi High Court in ICP Investments v Uppal Housing went against the grain to hold that derivative actions are subsumed within section 241 of the Companies Act, which deals with direct actions, and that a derivative action is per se not maintainable under common law. In this Note, I argue that this finding is unsustainable in law. First, it represents an inchoate appreciation of the distinction between wrongs to the company and wrongs to the shareholders. Second, it is not at all clear that the oppression, prejudice and mismanagement remedy under section 241 of the Act is wide enough to assimilate derivative actions. Third, the Court’s ruling fails to square up with procedural and remedial considerations.