Usual Arguments Raised By Majority And Minority
Majority typically argues 4 points. First, Section 399 maintainability: if dilution brings minority below 10%, petition fails. Second, no prima facie oppression. Third, dispute is contractual and only Civil Court can decide. Fourth, business decisions like director appointment are protected by business judgment. Minority counters: maintainability is there, CLB has wide power to protect interest, removal of directors should be stayed, demand books and transparency, and link poor corporate governance to mismanagement. Ultimately most cases settle with share purchase.
Chatterjee Petrochem: Key Legal Principles Reaffirmed
SC dealt with several lawyers: Desai, Dushyant Dave, K.K. Venugopal, Anil Diwan, Sundaram. Core issues:
Membership: Without registration, transferee is not member. CLB has no jurisdiction under 397.
Oppression: Must relate to affairs of company conducted oppressively. Breach between two shareholders is not enough.
Just and equitable winding up test must be satisfied before 397 relief.
Section 402 cannot be used to grant specific performance or to compel government disinvestment absent oppression.
Legitimate Expectation And Public Interest Angle
Chatterjee Group claimed "legitimate expectation" based on MoU that they would have control. SC noted this concept comes from public law and applies mainly to quasi-partnerships. HPL was large public limited company with government stake. Government counsel argued disinvestment is policy decision. Courts cannot interfere unless illegal. Financial institutions also backed government because company needed funds. So public interest outweighed private expectation.
What This Case Teaches For Future 397/398 Petitions
Prove membership first. Get shares registered.
Show oppression is by company, not inter-se dispute.
Show conduct is continuous and harsh, not just one commercial decision.
Do not expect CLB to enforce private agreements. Use Civil Court for that.
Focus on "end to matters complained" through practical relief like valuation and exit.
SC disposed case on facts rather than laying new principles. That is trend now. Each 397/398 case is fact-driven.
Conclusion
Oppression mismanagement 397 398 supreme court 2011 clarified limits. CLB is not Civil Court. It cannot convert breach of contract into oppression. But if real oppression is proved, CLB can act widely. At Nathan & Associates we draft 397 petitions focusing on membership, continuous conduct, and prayer for buyout. That aligns with post-2011 approach.
