I need not reiterate the fact that Company Law is complicated everywhere in view of its exposure, the interest of the stake holders, plethora of regulations, the stakes and the responsibility of the state or the statutory authorities. As everybody knows, in India, the jurisdiction to decide company disputes substantially rests with the Company Court and the Company Law Board. It is also true that SEBI and Securities Appellate Tribunal do decide important issues pertaining to a Company if it is a listed Public Company.

If the Company is a sick company, is in the process of revival and rehabilitation or if some liquidation proceedings are pending, then, the delay in the process is tolerated in most of the cases as I have seen. But, where there are disputes in the Company or between the groups when the Company is doing well and holds valuable properties, then, obviously, there will be lot of urgency in getting the required relief from the adjudicatory authority or forum. The disputes between the groups in the Company can result in filing the winding-up petition before the Company Court on the ground that there exist “just and equitable ground” to wind-up the Company or it will result in filing of a petition before the Company Law Board under section 397/398 of the Companies Act, 1956, seeking preventive measures alleging oppression and mismanagement by the majority in the Company.

In many cases, the minority group or the group of shareholders who approaches the Company Law Board under section 397/398 of the Companies Act, 1956, may not be able to visit the premises of the Company even and may not be able to know as to how the day-to-day affairs of the Company are being conducted. The situation will be different in listed Public Companies in view of the shareholding pattern as per the SEBI (DIP) regulations and also the requirements of listing agreement with the concerned stock exchanges. Despite the disputes between or among groups in the Company, a listed public company proceeds to function as if there exist no disputes between or among the groups in the Company.

The disputes between the groups in a Private Limited Company will be of serious in nature in many cases. The Company might not have recorded all its properties in the Books or might not have shown the true values of the properties of the Company in its books and it happens practically. That is why, even when the financial position of a Company is not good on paper, the group which approaches the Company Law Board will press for some relief or orders as if they are approaching the Board to put an end to the oppression and mis-management in the Company rather preferring to wind-up the Company. Under the circumstances narrated above, the group can press for winding-up of the Company on the ground that there exist “just and reasonable ground” and even on the ground that the Company is financially sick. But, it will not happen practically. As we see, practically, rather the shareholders or the group of shareholders in the Company, an outsider gets a Company wound-up and the liquidation proceeds.

In view of the reasons stated above, a group or the shareholders who approaches the Board under section 397/398 of the Companies Act, 1956, seek urgent orders and they expose urgency in the matter at each and every hearing. In fact, as everybody knows, only for the speedy disposal of matters and to support the corporate word, a separate adjudicatory forum like Company Law Board is constituted now and it is proposed to constitute a National Company Law Tribunal and Appellate Tribunal as everybody knows.  Despite the constitution of Company Law Board, a company dispute and especially the disposal of disputes under section 397/398 of the Companies Act, 1956 gets delayed.  It can be attributed to the attitude of the shareholders or the people involved in the case, the complications in deciding a company dispute and also work load before the Company Law Board.

As I have heard, many corporates expresses their unhappiness over the compulsory procedures to be followed. For example, if the Company Law Board decides to hear the opposite party in an application or the petition before passing orders, then, notice is to be served on the opposite party and ensuring the service of notice will be the responsibility of the applicant or the petitioner who approaches the Board seeking relief. The address available for service of notice may not be correct in some cases and it leads to delay. When the first notice and the second notice as the case may be, can not be served on the opposite party, then, there is an alternative way of serving the notice by giving a public notice in New Papers at the locality. This procedure certainly consumes time and it is inevitable and based on logical footing. While deciding matters under section 397/398 of the Companies Act, 1956, the Company Law Board is conferred with enormous powers subject to express limitations as stated under section 402 and as settled judicially and as such Company Law Board can pass orders ex-parte or even without the presence of opposite party if the situation demands. But, once the Company Law Board has decided to listen the opposite party on a particular issue, then, the applicant or the Petitioner is supposed comply with the procedure as contained in Company Law Board Regulations and settled practice.

I do strongly believe that the Company Law Board does not insist on technicalities on each and every issue as is the case before the Civil Courts for right or wrong. Despite the procedural relaxations before the Company Law Board to a great extent, there are certain procedures based on logical footing which can not be ignored.

Thus, it may appear to the corporates or the petitioners who approach the Company Law Board seeking urgent relief in matters like oppression and mismanagement that delay caused in passing the orders as prayed for due to procedural requirements, but, there is no option in many cases.


  • I have expressed my opinion on an interesting area based on my experience, my knowledge of the subject and based on the views expressed by some of the corporates in the course.


V.DURGA RAO, Advocate, Madras High Court.

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March 2021