Oppression and mismanagement petitions may proceed despite majority shareholding and continuing conduct, avoiding hyper-technical dismissal.

A petition under sections 397 and 398 of the Companies Act, 1956 is not rendered non-maintainable merely because the petitioners are majority shareholders if they satisfy the section 399 qualification. The court also held that a fresh oppression and mismanagement petition should not be rejected under Order VII Rule 11 CPC on a technical objection that no fresh cause of action existed, where the complaint reflected a continuing course of conduct and included later developments. The approach in such proceedings must remain substantive rather than hyper-technical, and the matter was remitted for adjudication on merits.

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Issues: (i) Whether a petition under sections 397 and 398 of the Companies Act, 1956 was not maintainable merely because it was filed by majority shareholders satisfying section 399. (ii) Whether the fresh company petition could be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908 for want of a fresh cause of action and whether such technical objection could defeat proceedings under sections 397 and 398.

Issue (i): Whether a petition under sections 397 and 398 of the Companies Act, 1956 was not maintainable merely because it was filed by majority shareholders satisfying section 399.

Analysis: The right to apply under sections 397 and 398 is governed by section 399, which fixes the qualifying shareholding and does not impose an express restriction that only minority shareholders may invoke the jurisdiction. The authorities considered recognize that members who satisfy section 399 may seek relief even where they constitute the majority, if they are effectively unable to protect the company against oppressive or prejudicial conduct. The statutory object is to end oppression and mismanagement and to enable the tribunal to pass such orders as may be necessary to bring the matters complained of to an end.

Conclusion: The objection to maintainability based solely on the petitioners being majority shareholders was rejected and the issue was decided in favour of the appellants.

Issue (ii): Whether the fresh company petition could be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908 for want of a fresh cause of action and whether such technical objection could defeat proceedings under sections 397 and 398.

Analysis: Proceedings under sections 397 and 398 are meant to address continuing oppression and mismanagement and the tribunal should be slow to terminate them on technical or preliminary grounds. The fresh petition added a later development concerning expiry of the lock-in period, while substantially retaining the earlier grievance, and the dispute had to be viewed as a continuous course of conduct rather than as isolated events. The Companies Act scheme and the CLB Regulations, including the saving of inherent power, support a pragmatic approach focused on substantive justice. The Code of Civil Procedure does not apply in full to the CLB except to the extent specifically provided, and the principle behind Order VII Rule 11 could not be used to foreclose adjudication on merits in the circumstances.

Conclusion: The rejection of the fresh petition for absence of a fresh cause of action was set aside and the issue was decided in favour of the appellants.

Final Conclusion: The impugned order was unsustainable and the matter was sent back for adjudication of the oppression and mismanagement petitions on merits in accordance with law.

Ratio Decidendi: In proceedings for oppression and mismanagement, a tribunal must adopt a substantive and not a hyper-technical approach, and a member who satisfies the statutory qualification may invoke relief even if that member holds a majority; a later development in a continuing course of conduct may justify entertaining the petition rather than rejecting it at the threshold.

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