Cause Of Action Is Must For 397/398 Petition
No lis lies without live cause of action. This is settled principle. Even under Arbitration Act s.11 and SARFAESI s.17, courts insist on live grievance. Section 397/398 also needs cause of action. Minority must show oppression or mismanagement. Section 399 deals with qualification. Section 397/398 speaks about conduct of affairs. Without grievance, CLB cannot act. But nature of cause is different from civil suit.
Limitation Act Does Not Apply To 397/398
This is the most debated point. Companies Act 1956 does not prescribe limitation for 397/398.
Delhi HC in Surinder Singh Bindra Vs Hindustan Fasteners, 1990 AIR Del 32, 1990 69 CC 718 clarified. Acts can be looked into if they form part of continuous process continuing till date of petition. Even if some acts happened 3 years earlier, they can be considered if part of same transaction of oppression.
Court said it is like "continuing cause of action". If effect of single wrongful act is continuing oppression, petition is maintainable though act is old. Whether act is stale or isolated is question of fact. After 1988 amendment, CLB is forum, so Limitation Act 1963 exercise is academic. So technical limitation has little significance. What matters is whether grievance is live.
Continuous Oppression Vs Isolated Act
Oppression must be continuous, harsh and burdensome. Isolated act 5 years back will not give cause today.
But if Board resolution 3 years back started a course of conduct that continues - like diverting profits, excluding minority from management - then cause continues. CLB can look at entire chain. If act is completed and effect also ended, then petition is stale. CLB will dismiss.
Wide Powers Of CLB: Strict Law Vs Equity
There are 2 views.
View 1: Relief only if strict oppression/mismanagement is proved.
View 2: Even without strict oppression, CLB can pass orders under s.402 to regulate affairs and put end to matters.
Precedents show CLB has equitable jurisdiction. Order must be reasonable, in line with chapter object, and follow natural justice.
This power is sharp weapon. It can protect minority. It can also be misused. So CLB carries great responsibility. It must filter vexatious petitions at threshold. How To Plead Cause Of Action Properly
Show Continuity: Link old acts to present conduct. Show how past resolution still affects company today.
Avoid Stale Claims: Do not rely only on old isolated events. Plead recent acts.
Focus On Effect: Even one act can be cause if effect is continuing.
CLB will examine facts. If cause is live, it will entertain despite delay.
Conclusion
Cause of action limitation 397 398 clb is governed by equity, not Limitation Act. As per Surinder Singh Bindra, CLB can look at acts forming continuous process or same transaction even if 3 years old. Limitation is not bar if oppression is continuing. But isolated stale acts cannot be revived. CLB must ensure petition is based on live grievance and pass reasonable orders under s.402. This balances minority protection with prevention of misuse. The focus is on present prejudice, not on technical delay.
