Why 399 exists and how it is misused
Section 399 sets threshold to file 397/398 petition. It ensures only serious shareholders approach CLB. Requirements are holding, consent, proof. But majority often uses it technically to kill petition at outset or later. When powers of CLB are debated, this becomes weapon. Minority already struggles to get relief in going concern. If petition is dismissed on technical consent or membership issue, irreparable damage happens. Therefore interpretation must balance gatekeeping with access to justice.
Timing of maintainability plea matters
If maintainability under 399 is raised at beginning, CLB can examine and decide. If holding is disputed, Board can take evidence and proceed. But raising it after full trial is unfair. In 397/398, parties spend time and money. Suddenly saying "you are not qualified" wastes judicial time and harms minority. Unlike civil suit, this remedy is special and preventive. So doctrine of waiver applies. Silence at start should be taken as acceptance. Board must see conduct of parties. Consent and evidence under regulation 24
Regulation 18 requires consent proof. Regulation 24 allows Board to call further evidence. SC in JP Srivastava said absence of document at filing is not fatal. If objection is taken, petitioner must be allowed to lead evidence. Board cannot decide only on petition averments if it itself relies on outside material. This shows procedure is flexible. Technical deficiencies can be cured if substantial compliance exists and no prejudice to other side. This is important because shareholding patterns change and records may be with company.
Death of party and continuing interest
Long pendency means some petitioners die. Objection that LR consent not filed is technical. Board must ask: do remaining petitioners still meet 399 percentage? Are LRs interested? If yes, continue. If no, dismiss. Straight principle cannot be made. Each case differs. The test is whether petition still represents body of shareholders with stake. If yes, case must go on. Rejecting on form defeats purpose of Act.
Conclusion
399 maintainability 397 398 consent holding issues must be decided with broad commonsense. JP Srivastava 2005 is authority: substance over form. Qualifying percentage is to prevent frivolous cases, not to shut genuine grievance. In 2010, CLB must avoid technical approach. It must ensure 397/398 works as preventive tool and not as procedural trap for minority.
