Natural justice is not required for the preliminary section 399(4) screening under the Companies Act, 1956.

Section 399(4) of the Companies Act, 1956 empowers the Central Government to grant leave for a member to apply under sections 397 and 398 only after forming a preliminary opinion that statutory conditions are satisfied. The text explains that this is an administrative, subjective screening function, not an adjudication of oppression or mismanagement, so the principles of natural justice do not require a pre-decisional hearing to the company. The applicant must comply with Rule 13 by furnishing the required particulars and evidence, and the Government may seek further material if needed. Company participation at this stage is neither mandated by the statute nor required by the nature of the inquiry.

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Issues: (i) Whether the Central Government is required to comply with the principles of natural justice while considering an application under section 399(4) of the Companies Act, 1956. (ii) If natural justice applies, what is the scope of the hearing and procedure required at that stage.

Issue (i): Whether the Central Government is required to comply with the principles of natural justice while considering an application under section 399(4) of the Companies Act, 1956.

Analysis: Section 399(4) authorises the Central Government to permit a member to apply under sections 397 and 398 only if, in its opinion, circumstances exist making it just and equitable to do so. The scheme of sections 397, 398 and 399, read with Rule 13 of the Companies (Central Government) General Rules and Forms, 1956, shows that this is a preliminary, subjective and administrative function. The Government is only to form an opinion on whether the statutory conditions are met and whether the proposed application is frivolous or not; it does not adjudicate the merits of the oppression or mismanagement allegations. As no final rights of the company are determined at that stage, and the company gets a full hearing before the Company Law Board in the substantive proceedings, the requirement of a pre-decisional hearing to the company is not attracted.

Conclusion: The Central Government is not required to hear the company before deciding an application under section 399(4).

Issue (ii): If natural justice applies, what is the scope of the hearing and procedure required at that stage.

Analysis: The judgment holds that even where fairness is relevant, its content depends on the nature of the power exercised and the consequences of the decision. Since the section 399(4) decision is only an enabling permission and not an adjudication, the statutory procedure is confined to the applicant furnishing the particulars and evidence required by Rule 13, and the Central Government may call for further material from the applicant if necessary. The company's participation at that stage is neither mandated by the statute nor justified by the nature of the preliminary inquiry.

Conclusion: The only procedure required is compliance with Rule 13 and consideration of the applicant's material by the Central Government; no notice or hearing to the company is required at that stage.

Final Conclusion: The impugned direction requiring service of the contemplated petition on the company before consideration of the section 399(4) request was quashed, and the Central Government was directed to decide the application without joining the company.

Ratio Decidendi: Where a statutory authority exercises a preliminary administrative power on subjective satisfaction without finally determining any party's rights, the principles of natural justice do not require a pre-decisional hearing to the affected opposing party unless the statute expressly so provides.

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