Private companies and group disputes
India has lakhs of private companies. Family ownership means two groups often control. No SEBI, no listing rules. So disputes are resolved under Companies Act. When trust is lost, oppression petitions follow. Section 397/398 is meant for prevention. But remedy is not for every complaint. CLB has to balance rights of company, creditors, employees. Delay is common because issues are factual. Technical compliance issues are separate and can be compounded.
Facts showing lack of bonafides
85% vs 15% shareholding. 10 years of smooth functioning. Board had minority directors. All AGMs and Board meetings were with consent. No concealment. After dispute, minority lists all past transactions as oppression. But they were aware and consented. Few irregularities in filings also existed with full knowledge. Can they now claim oppression? If yes, any minority can wait, participate, and later file. That will make business impossible.
What courts say about oppression
Mauli Chand Sharma says 397/398 is for extraordinary situations. Gaekwad says conduct must be harsh, wrongful and continuous. It must give majority undue advantage. Isolated or consented acts do not qualify. Dale says directors owe fiduciary duty, but in private company all shareholders are often directors. So duty is mutual. If minority approved resolution, they cannot later allege it. Court must see if winding up would be just and equitable, and whether oppression is proved. If proof is unsatisfactory, petition must be rejected.
Clb must examine motive and participation
To my knowledge, there is no authority allowing minority to allege their own acts. Object of chapter is protection, not extortion. Bonafides are key. CLB must ask: Did minority benefit? Did they vote? Did they delay? If yes, relief is not warranted. Irregularities in ROC filings are not oppression. They are compliance issues. Using them to get control is misuse. Authority of CLB also depends on shareholding and impact on stakeholders.
Conclusion
Section 397 398 companies act case study consent shows limits. Minority cannot take advantage of own knowledge and consent to claim oppression. In 2010, CLB must apply Gaekwad test strictly. This will ensure 397/398 is used for genuine cases and not for afterthought disputes in private companies.
