Problem of technicalities in clb proceedings
397/398 petitions often get stuck on technical issues. Majority cites section 402 limits. Parties argue disputed facts cannot be decided. Minority complains Board relies on procedure instead of substance. This happens because provisions on oppression and mismanagement lack clarity. Despite SC guidance, practice varies. Legislative intent is to provide quick remedy, but technical approach delays it. What is needed is interpretation that balances rights and keeps company running. Courts must ensure Act is not used to oppress or to harass.
Bombay high court on ejusdem generis misuse
In Ravi Kiran Agarwal 2009, Bombay HC dealt with CLB order restricting section 405. CLB applied ejusdem generis and said "any other person" means person like those in section 402(e). HC rejected this. It listed 5 conditions for ejusdem generis and held they are not met here. Section 405 and 402 operate in different fields. Section 402 illustrates powers, not limits. Section 405 is about parties. Words "any other person" must be read naturally. If Parliament wanted restriction to agreement holders, it would have said so. Restricting meaning violates natural justice because affected third party would have no hearing.
Natural justice and complete adjudication
HC emphasized that order under 397/398 may affect third parties. If they are not impleaded, order will be incomplete and may be challenged later. Power to implead must be exercised to enable full adjudication. Sufficient cause is only condition. This can include shareholders not party, employees, creditors, or contracting parties. CLB must decide based on facts. This approach avoids piecemeal litigation and protects all interests. It also prevents majority from hiding behind technicality that outsider cannot be heard.
Way forward for oppression provisions
Proposed Companies Bill may bring NCLT and NCLAT, but clarity on oppression provisions is still needed. Till then, courts and CLB must follow purposive interpretation. Bombay HC judgment is guidance that wide powers under 397/398 must be read with section 405 to ensure all affected are heard. Interpretation cannot be used to deny relief. It must serve object of protecting minority and company. As SC said in amendment challenge, directions must be implemented in letter and spirit without dilution.
Conclusion
Section 405 companies act 1956 impleadment third party must be read widely. Bombay HC 2009 rightly set aside narrow interpretation. 397/398 is not about technical win but about corporate governance. In 2010, this principle helps CLB deal with complex disputes fairly. Substance, natural justice and company interest must guide every interpretation.
