Oppression And Mismanagement: Why Petition Cannot Be Static
Section 397 deals with oppression. Section 398 deals with mismanagement. Both are inter-connected. Once trust deficit arises in family or closely held company, majority keeps trying new tactics even during pendency of petition.
If law forces minority to amend petition for every new act, purpose of 397/398 is defeated. Amendment takes time. CLB may not grant interim relief. Meanwhile shares may be transferred, assets sold, or board reconstituted. So CLB must have power to look at what happened after filing.
Case Law On Subsequent Events: What Is Settled
Clive Mills Co Ltd 1964 34 Com Cases 731 said petition must give full particulars of fraud, mismanagement. That is for notice to opposite party. It does not bar later developments.
Mohta Bros 1970 said confine to petition. But Karedla Suryanarayan 1998 CLB clarified: main petition must stand on its own. If it fails, subsequent events alone cannot give relief. But if main petition is proved, subsequent events can be used to mould relief. Interim relief limited to status quo.
Jer Rutton 2001 allowed amendment to bring subsequent facts. Court said once maintainable, subsequent events can be considered for complete justice. Promode Kumar Mittal 1980 said Court must notice all subsequent events for final relief.
Regulation 24 And CLB’s Duty To Ascertain Truth
Regulation 24 gives CLB power to call for further evidence before passing orders. Purpose is to satisfy truth of allegations and to get information necessary for orders.
This regulation makes CLB different from Civil Court. CPC amendment rules are not strictly applicable. CLB can accept affidavit, ask for documents, and decide. Insisting on formal amendment for every subsequent act will only benefit majority who want delay.
Criticism From Both Sides And CLB’s Balancing Role
Minority complains relief is not effective, CLB insists on technicalities, and execution is problem. Majority complains 397/398 is misused, false petitions damage company, and CLB entertains loosely. Truth is in middle. CLB must not dismiss prima facie without facts because 397/398 is protective provision. At same time, it must discourage frivolous petitions. Taking subsequent events by affidavit helps. It avoids delay, gives both sides hearing, and allows CLB to pass reasoned order to end matters complained of.
Conclusion
oppression mismanagement subsequent events clb 397 398 must be read purposively. Law should not force minority to keep amending. CLB can and should consider subsequent events up to final hearing, either by amendment or affidavit. Regulation 24 supports this. Object is to protect company and minority, not to trap them in procedure. At Nathan & Associates we file comprehensive initial petition and update CLB with affidavits. That works best in practice.
