Section 399: Threshold For Filing 397/398 Petition
Section 399 prescribes qualification to file oppression and mismanagement petition. It is a gatekeeping provision to prevent frivolous litigation. For company having share capital: 100 members or 1/10th of total members, whichever is less. Or members holding not less than 1/10th of issued share capital. Calls on shares must be paid. For company without share capital: 1/5th of total members.
So application can be by single member with 10% shares, or representative application by group.
What Is "Consent In Writing" Under Section 399(3)
When application is representative, other members must give "consent in writing". This is not mere signature. Delhi HC in Omni India Ltd Vs Balbir Singh, 1989 66 Comp Cas 903 explained meaning. "Consent" means conscious approval, deliberate and voluntary agreement with free mind. Consent in writing must show that person applied mind to allegations and reliefs sought.
Court said: If intention was only signature, Act would have said "consent" only. Use of "consent in writing" means member must know what allegations are made and what reliefs are prayed. Otherwise purpose of s.399 will be frustrated. Because 397/398 can lead to disastrous consequences like winding up, buy-out, or management change.
Why Mind Application Matters In Closely Held Companies
In family companies, one prominent member leads group. Others blindly sign. That may be fine if there is trust. But when many members join, CLB must ensure they are not used as name-lenders. 397/398 petition can destroy company value and business. So consenting members must know: what is oppression alleged, what mismanagement is claimed, what order is sought under s.402. Without this, any 100 members can be gathered to harass majority. That is why "application of mind" is mandatory.
Who Can Object To Consent And At What Stage
Objection on consent is question of law and can be raised anytime. But timing matters for justice. If respondents raise it in reply or orally at initial stage, petitioners get chance to cure defect. They can produce affidavits showing members applied mind. Even if no objection, CLB can suo moto ask petitioners to clarify. No hard and fast rule. Facts decide.
Calcutta HC in Pramod Kumar Mittal Vs Andhra Steel Corporation, 1985 58 CC 772 added another angle. 397 application is representative. Consenting members have locus to be heard. If lead petitioner backs out, consenting members can be added as parties in their own name to continue petition. Court should not deny that.
Practical Guidance For Filing Representative Petition
Draft Consent Letter Properly: Mention allegations in brief and reliefs sought. State member has read petition and consents. File Affidavit: Each consenting member can file affidavit confirming application of mind. Respond Early: If consent is defective, object at threshold. If not, CLB may allow adding members later to meet qualification.
CLB will look at substance over form to protect object of 397/398.
Conclusion
Section 399 consent 397 398 clb qualification requires more than signature. As per Omni India, consent in writing means conscious approval after applying mind to allegations and reliefs. This prevents misuse of representative action. Pramod Kumar Mittal confirms consenting members have independent locus. Objection can be raised anytime, but early objection is fair. CLB can also allow adding members to cure defect. The goal is to ensure genuine grievance is heard while stopping vexatious petitions. This balance keeps s.397/398 effective for minority protection without paralyzing companies.
