Rectification of register of members must be preferred where membership validity is disputed; petition relief barred pending rectification.

Where validity of entries in the register of members is disputed, the preferred remedy is rectification and petitions under minority-protection provisions seeking relief dependent on membership alteration are not maintainable until rectification is determined; a change in management effected to protect or satisfy a creditor's interest falls within the creditor-exception and does not by itself constitute actionable conduct under minority-protection provisions; allegations of removal as director or general mismanagement do not constitute oppression unless pleaded and proven as a distinct infringement of rights in the capacity of a member.

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Issues: (i) Whether the petition under sections 397 and 398 of the Companies Act is maintainable in view of an existing dispute as to membership and the remedy under section 155; (ii) Whether the change in management effected by share transfers was brought about in the interest of a creditor and thus falls within the exception in section 398(1)(b); (iii) Whether the facts alleged amount to oppression of the appellant in his capacity as a member.

Issue (i): Whether the petition under sections 397 and 398 is maintainable given the pending dispute as to the validity of entries in the register of members and the availability of relief under section 155.

Analysis: The Court examined the overlap between the petition under sections 397/398 and the separate proceeding for rectification of the register under section 155. The Court held that questions as to the validity of membership and entries in the register are appropriately and preferentially determined by a section 155 proceeding, and that the present petition seeks relief that depends on altering the register or membership status which cannot be granted while the register remains undisturbed.

Conclusion: The petition under sections 397 and 398 is not maintainable insofar as it seeks relief dependent on the rectification of the register; decision in favour of Respondent.

Issue (ii): Whether the change in management was brought about in the interest of a creditor and therefore excluded from actionable conduct under section 398(1)(b).

Analysis: The Court considered the factual finding that the transfers and consequent change in management were effected to satisfy or in relation to the position of a creditor of the company. The legislative exception in section 398(1)(b) contemplates that where creditors become shareholders or otherwise effect a change in control to protect their financial interest, such change does not, by itself, furnish a cause of action under section 398.

Conclusion: The change in management was brought about in the interest of a creditor and thus falls within the exception of section 398(1)(b); decision in favour of Respondent.

Issue (iii): Whether the allegations made by the appellant constitute oppression of the appellant as a member of the company.

Analysis: The Court reviewed the petition and found that the appellant's grievances mainly arose from his removal as a director and alleged mismanagement, without specific allegations of infringement of his rights as a member distinct from his position as director. Established authorities require oppression to be pleaded and proven in the character of a member; mere removal as director pursuant to a valid company resolution under section 284 or general allegations of improper conduct do not suffice.

Conclusion: The appellant has not made out oppression of his rights as a member; decision in favour of Respondent.

Final Conclusion: The substantive reliefs under sections 397 and 398 cannot be granted because the dispute as to membership should be determined by the pending section 155 proceeding and because the change in management falls within the creditor exception; accordingly the appeal is without merit and the appellant is not entitled to relief in this proceeding.

Ratio Decidendi: Where the validity of entries in the register of members is in controversy, the remedy by rectification under section 155 is the appropriate and preferred route and, until the register stands rectified, members entered therein may exercise their rights; additionally, a change in management effected in the interest of a creditor falls within the exception in section 398(1)(b) and does not itself constitute actionable oppression under sections 397/398.

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