The Problem: No Prescribed Limitation In Companies Act
Civil suits have Limitation Act. But Companies Act 1956 is silent on limitation for 397/398. Does that mean minority can file after 20 years. No. Cause of action must exist. Principle is same as arbitration and SARFAESI - no live claim, no relief. So question is not "how many years", but "is grievance continuing".
Delhi HC Law: Continuing Cause Of Action
Surinder Singh Bindra Vs Hindustan Fasteners, 1990 69 CC 718 is leading authority.
Court held: CLB can look at acts if they are part of continuous process up to date of petition. Even acts 3 years prior can be looked into if part of same transaction constituting oppression.
Example: If resolution to siphon funds was passed 4 years back and money is still not returned, effect continues. That is continuing cause. But if act was one-time and effect ended, it is stale. Then petition fails. Court called it akin to "continuing cause of action". After CLB was made forum, Limitation Act argument became academic.
Two Approaches To 397/398 Jurisdiction
Approach A: Strict. Relief only when clear harsh and burdensome act against minority exists.
Approach B: Wide. Even without strict oppression, CLB can regulate affairs under s.402 to do justice. Law prefers Approach B with safeguards. 397/398 is not just remedial, it is regulatory. Object is to put end to matters and ensure proper management. But this wide power can be misused. So CLB must be careful. It must see bona fides and prejudice.
Practical Test For CLB
While admitting petition, CLB asks:
Is there live grievance: Are affairs still being conducted oppressively. Is there nexus: Are old acts connected to present conduct. Is relief still relevant: Can order cure prejudice. If yes, delay is not fatal. If no, petition is dismissed as academic. Principles of natural justice must be followed. Respondents must get chance to explain.
Conclusion
Section 397 398 limitation period cause of action has no fixed time limit. Bindra judgment says focus is on continuity. If oppression is continuing, petition is maintainable irrespective of when initial act happened. Limitation Act does not apply. But stale isolated acts cannot be used. CLB’s power under 402 is wide but must be exercised reasonably and fairly. This ensures 397/398 remains protection for minority and not a tool for harassment.
