Minority protection and majority grievance
Section 397/398 was created to stop majority from oppressing minority and to prevent mismanagement. But in practice minority also files baseless cases to harass majority. Both sides come to CLB with complaints. Board must see whether real oppression exists or it is just family dispute. This balancing makes role of CLB very sensitive and difficult.
Delay and procedure problems
First problem is time. Board has to go through thousands of pages. Interim orders are passed with condition to apply for vacation. Counsels must assist, else matter drags. Transfer of members, technical objections and adjournments add delay. Special tribunal idea was for speed, but reality is different. In valuation based exit, problem is fake books in private companies. Without proper accounts, no fair valuation possible.
Two real cases observed
One case: Promoter with 100% was sidelined by outsider who filed false ROC forms. Promoter spent months to clear charge. Business suffered. Second case: Family company where property sold illegally. Member living abroad could not get injunction. Matter pending for years with endless applications. In both, stakes are high and delay hurts company.
30 key issues in 397 398 adjudication Nature of remedy, locus to file, majority’s right, maintainability, membership proof, conditions precedent, definition of oppression, acts constituting oppression, definition of mismanagement, acts constituting mismanagement, whether irregularity equals oppression, public interest test, need of particulars, composite petition, subsequent events, res sub judice and res judicata, CPC rules, deciding disputed facts, legal representatives, holding vs subsidiary, difference with winding up under 433, arbitration ouster, limitation, approach in entertaining, s.25 companies, essentials to check, role of precedents, consent under 399, membership proof, powers under 402. These show why 397/398 is not simple.
Why reforms are needed Orders are often not executed. Contempt is only tool and it has loopholes. Private companies need better compliance. NCLT may bring expertise, but unless delay is cut and execution strengthened, object will not be met. Both minority and majority need quick and fair relief.
Conclusion
Oppression mismanagement 397 398 complications 2010 highlight gap between law and practice. CLB has wide powers but procedure and delay make it hard. Real protection will come only when cases are decided fast, books are clean and orders are enforced. Till then 397/398 will remain complicated but important remedy.
