Difference between civil suit and 397 398 proceeding
A proceeding under section 397/398 of Companies Act 1956 is very different from ordinary civil suit. In civil suit subject is usually past act or omission and pendency does not affect parties much. But in 397/398, company is a going concern. Oppression and mismanagement may continue even while petition is pending. Company must comply with Act, file returns, borrow funds, and run business. Many interested parties are involved. If CLB insists on technicalities like CPC, object of "putting an end to matters complained of" will be defeated. Therefore CLB cannot be treated like Civil Court. It must be flexible and focus on substance.
Why technicalities defeat object of 397 398
Minority qualified under section 399 can file petition alleging continuous oppression. But majority may commit further acts of oppression during pendency. If CLB asks minority to amend petition for every new act, it becomes technical and delays justice. Similarly if majority has grievance against minority in counter, CLB cannot refuse relief only because it was not asked in main petition. The right approach is to ascertain all disputes finally and give comprehensive finding. This is needed to regulate affairs and end disputes. Insisting on CPC procedures will lead to endless litigation and harm company and stakeholders. Hence logic and object must prevail over form.
AP hc view in sri ramdas motor transport case
Andhra Pradesh High Court in Sri Ramdas Motor Transport Ltd & Others Vs. Karedla Suryanarayana & Others 2002 110 CC 193 observed that even if CLB exercises quasi-judicial powers, it must follow CPC rules and also go beyond them in furtherance of justice. Principles of natural justice must be observed. Personal hearing, opportunity to present case, and cross-examination are essential. Board cannot act illegally or irrationally just because it can regulate procedure. Passing orders on xerox copies without seeing originals when fabrication is alleged is miscarriage of justice. Court held CLB order was not in accordance with CPC nor natural justice and was arbitrary. This shows CLB must balance flexibility with fairness.
Role of clb regulations and natural justice
CLB regulations provide basic procedure but are not detailed like CPC. That is intentional. Special tribunal was created to avoid delay of CPC. But absence of CPC does not mean no procedure. CLB must adopt procedure as situation demands, keeping in mind principles of natural justice. There must be good logic and strong reason for every order. If Board follows object of 397/398 and natural justice, its proceeding is justified. If it hides behind technicalities, object will never be achieved. The idea is to regulate company and end disputes quickly, not to make it another civil court.
Conclusion
Civil procedure code section 397 398 companies act 1956 relationship is one of guidance, not strict application. CLB should not go technically. It must look at continuing nature of oppression, interest of company, and public interest. AP HC in Sri Ramdas case reminds that even administrative tribunals must follow law and natural justice. Flexibility is good but arbitrariness is not. In 2010, this approach is needed to make 397/398 remedy effective for minority and for company.
