Continuing oppression and mismanagement can rely on older acts when they form one course of conduct under company law.

Article 137 applies to petitions under sections 397 and 398 of the Companies Act, 1956, but acts older than three years are not excluded if they form part of a continuing course of oppression or mismanagement, a common transaction, or conduct with ongoing oppressive effect. The Court treated the limitation objection as untenable to that extent. On the merits, it found that the company was controlled by one group, the board had been reduced to a nominal body, statutory defaults persisted, and the petitioners were effectively excluded from management. Finding lack of probity and fair dealing, the Court held that corrective relief under section 402, including valuation of shares and a buy-out arrangement, was appropriate rather than winding up.

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Issues: (i) Whether a petition under sections 397 and 398 of the Companies Act, 1956 was barred by limitation under article 137 of the Limitation Act, 1963 when some complained-of acts were older than three years; (ii) Whether the affairs of the company were being conducted in a manner oppressive to members and prejudicial to the interests of the company and public interest, warranting relief under sections 397, 398 and 402.

Issue (i): Whether a petition under sections 397 and 398 of the Companies Act, 1956 was barred by limitation under article 137 of the Limitation Act, 1963 when some complained-of acts were older than three years.

Analysis: Article 137 was held applicable to a petition under sections 397 and 398. However, the Court held that earlier events are not automatically excluded merely because they occurred more than three years before filing. Where past acts form part of a continuous course of conduct, a common transaction, or have continuing oppressive effect up to the date of the petition, they may be considered. The Court therefore rejected the narrower view that all events outside three years are barred irrespective of their connection with the pleaded oppression or mismanagement.

Conclusion: The limitation objection was overruled in so far as the petition relied on a continuing course of oppressive and mismanaged conduct.

Issue (ii): Whether the affairs of the company were being conducted in a manner oppressive to members and prejudicial to the interests of the company and public interest, warranting relief under sections 397, 398 and 402.

Analysis: The Court found that the Sahni group effectively controlled the company, the board had been reduced to a non-entity, statutory requirements and filings were in default, and the petitioners had been sidelined from real participation in management. Although the dispute about increase in share capital by itself was not accepted as a standalone act of oppression, the broader pattern showed lack of probity and fair dealing and justified intervention. The Court also held that the company was a running concern and that any winding up order would unfairly prejudice employees and other interests, so relief under section 402 was the proper course.

Conclusion: The petition was allowed and the affairs of the company were held to require corrective orders, including valuation of shares and a buy-out arrangement.

Final Conclusion: The petition succeeded on the basis of oppressive and prejudicial conduct in the management of the company, and the matter was directed to proceed to appropriate remedial orders under section 402, including valuation of shares and consequential restructuring of control.

Ratio Decidendi: In proceedings under sections 397 and 398 of the Companies Act, 1956, older acts may be relied upon if they form part of a continuous course of oppression or mismanagement, and the proper relief where winding up would unfairly prejudice members is to grant corrective orders preserving the company as a going concern.

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