Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
No lis lies when there is no live
claim or the cause of action and it is settled legal principle. The requirement
of having a live claim for seeking relief is also been highlighted by the
Hon’ble Apex Court while dealing with the scope of powers of Chief Justice
under section 11 of Arbitration and Conciliation Act, 1996. Again, there were
many judgments under SARFAESI Act, 2002 on the issue of cause of action despite
the specific provision in the Act that the borrower can approach the Debt
Recovery Tribunal under section 17 of the SARFAESI Act, 2002 if he has any
grievance at the Bank’s action. Thus, the issue of cause of action and law of
limitation is very significant in any lis. Section 397/398 of the Companies
Act, 1956 provides a remedy to the minority shareholders or the shareholders
qualifying under section 399 to approach the Company Law Board and the Company Law
Board has wide powers in passing orders in order to put an end to the matters
complained of or in order to regulate the affairs of the Company. While section
399 of Companies Act, 1956 deals with the issue of qualification, section
397/398 itself speaks about ‘cause of action’ and the issue of limitation.
Dealing with the issue of ‘cause of action’ and law of limitation under section
397/398 of Companies Act, 1956 is infact very complicated. It is settled that a
minority shareholders can question the harsh and burdensome acts of the
majority in the Company. It is also settled that the oppression or the
mismanagement sought to be alleged should be a continuous one if the minority
should approach the Company Law Board under section 397/398 of the Companies Act,
1956. In fact, the issue of ‘cause of action’ and law of limitation can not be
separated while dealing with the law under section 397/398 of the Companies
Act, 1956 and the issue of limitation has little significance. The provisions
of law of limitation will have no application to a petition under section
397/398 of Companies Act, 1956. Its all depends upon the facts and
circumstances of the Case.
There are different views as to
how section 397/398 of Companies Act, 1956 is to be interpreted when it comes
providing a remedy to the minority shareholders. There is a view that unless
there exists act which is harsh and burdensome in the company against the
minority, minority is not entitled for any relief under section 397/398 of
Companies Act, 1956. There is another view that even if there is no oppression
or mismanagement in the Company in stricto senso, the Company Law Board can
still pass appropriate orders under section 402 of the Act in order to regulate
the affairs of the Company and in order to put and end to the matters
complained of. It is also settled that there can not be any hard and fast rule
while entertaining and passing appropriate orders in a petition by the minority
against the majority under section 397/398 of Companies Act, 1956. Going by the
precedents and the complications in corporate affairs, it can be understood
that an order of the Company Law Board under section 397/398 of the Companies
Act, 1956 should be reasonable, towards the object of the chapter, in adherence
to the principles of natural justice. This is a very complicated proceeding and
it acts as a sharp weapon in the hands of minority shareholders to protect
their interests and also the provisions of the chapter can conveniently be
misused with ulterior motive. Thus, the Company Law Board carries a greater
responsibility while entertain petitions under section 397/398 of Companies
Act, 1956. Coming back to the issue of ‘cause of action’ and the issues of
limitation, the Hon’ble High Court of Delhi, in Surinder Singh Bindra Vs.
Hindustan Fasteners (P) Limited 1990 AIR (Del) 32, 1990 (69) CC 718, was
pleased to observe as follows:
“(12) These can be looked into if
they form part of a continuous process continuing up to the date of petition
showing that the affairs of a company are being conducted in a manner
stipulated in Ss. 397 and 398 of the Act. This, in fact, is the requirement of
these provisions. Further, if the acts complained of form part of the same
transaction constituting oppression or mismanagement these acts can also be
looked into even if they occurred three years prior to the institution of the
petition. Same will be the case if the conduct arising from even a single
wrongful act in a given case is such that its effect will be a continuous
course of oppression or mismanagement though the wrongful act occurred three
years earlier to the date of filing of the petition. It is something akin to
the terminology 'continuing cause of action'. Whether events complained of form
part of continuous acts or not or form part of the same transaction
constituting oppression of mismanagement or effect of a particular wrongful act
is continuous course of oppression or mismanagement or the wrongful act is
stale or is an isolated event, would all be different questions to determine. To
this extent, therefore, the preliminary objection regarding maintainability of
the present petition on the ground of limitation is overruled. This exercise
about the applicability of the provisions of the Limitation Act, 1963 to the
application under Ss. 397 and 398 of the Act, would now appear to be academic
as after the Companies (Amendment) Act, 1988, applications under these sections
lie before the Company Law Board.”
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
