Why 397 398 is rare in listed companies
It is very rare to see 397/398 petition in listed public companies. SEBI DIP regulations ensure wide shareholding and compliance. No single person holds entire shares. Stakeholders are many and governance is stricter. Disputes are handled through SEBI, stock exchanges and disclosures. So 397/398 is mostly a family company or closely held company issue. In such companies, books are not maintained, returns are not filed and business runs like proprietorship. When trust breaks, oppression and mismanagement allegations come easily.
Why family companies face most petitions
Family companies do not follow corporate discipline. Procedural irregularity may not always mean oppression, but it can be linked to it. Courts have no fixed rule. Because records are poor, it is easy to allege mismanagement. That is why most 397/398 petitions come from family companies. Section should not be misused, but reality is different. Lack of governance makes every small issue look big. Problem of forum shopping in company disputes
Big issue is approaching multiple forums for same dispute. Companies Act 1956 has no express bar on civil court jurisdiction. Civil courts are cautious and often say proper forum is CLB. But parties still file suits. If civil court denies relief, same party goes to CLB under 397/398. Then majority opposes strongly saying issue was already raised. Questions arise: Does earlier suit bar 397/398? Can CLB look into matter pending in civil court? Can CLB re-decide what civil court found? No straight answer. This is forum shopping and it vexes majority and stalls business.
Simultaneous proceedings and stalling tactics
Another complication is counter proceedings. In 397/398, there will be serious allegations and counter allegations. Majority may start parallel proceeding in another forum on same facts and argue 397/398 should be stayed. This stalls CLB. Both sides use procedure to delay. There is no straight jacket rule. It depends on facts. But clear rule is needed to bar vexatious forum shopping so majority can run business without hindrance.
Clb burden and need for clarity
Company Law Board is already burdened with complicated responsibilities and limitations. Criticism on delay and procedural compliance is common. But delay is also because of multiple forums and conflicting orders. Companies Bill 2009 proposes express bar on civil courts, like SARFAESI. That may help. Till then, CLB must handle forum shopping carefully without denying genuine rights.
Conclusion
Section 397 398 forum shopping company law board 2010 is real problem. Listed companies avoid it due to regulation. Family companies suffer due to poor governance. Multiple forums create confusion and delay. Legislature must clarify jurisdiction. Until then, CLB must balance speed with fairness and stop abuse of process.
