Two Extremes In Interpreting 397/398
One extreme: "Let majority give everything. We will see later." This leads to misuse. Majority complains of harassment. Other extreme: "No relief unless full proof." This kills minority remedy. Law is in middle. Section 402 gives wide power but must be exercised judicially. Regulation 24 And The Disclosure Trap
Regulation 24 lets CLB order production of documents. But when. Blancatex says only after prima facie is shown. CLB in that case said: "because R3 is brother of R5 director, we need documents". HC said no. That is using disclosure to build case. Wrong. If every 397 petition gets documents, 10% group can see all company secrets.
Appeal And New Act: What Changes
Under 10F, appeal is now easier. If CLB order is perverse, HC will interfere. So CLB must give reasons. New Act 2010: 5% can file with exemption. Creditors can also approach. Class action for investors. NCLT will be flooded. If NCLT copies old liberal style, chaos will happen.
Practical Test For CLB Before Interim Order
Admissions: Read petition. Are facts specific. Dates, resolutions, amounts.
Documents: Are any documents attached to show oppression. Likelihood: On this material, is there reasonable chance of success. Only if above are yes, order disclosure or interim. Else dismiss.
Conclusion
397 398 interim relief document production prima facie requires judicial discipline as laid down in Blancatex. NCLT cannot order document production to discover a case; it must first find a prima facie case from pleadings. With easier filing norms and class action under the new Act, the risk of frivolous litigation is high, so early screening is essential. Companies should strengthen compliance to defend themselves, and minority shareholders must approach with concrete evidence rather than vague allegations. This approach will protect both business interests and genuine minority rights, ensuring Section 397/398 remains a meaningful remedy.
