Section 397 – The Companies Act,1956

The Companies Act, 1956

397. Application to [Tribunal] for relief in cases of oppression.

397. Application to 1[Tribunal] for relief in cases of oppression.(1) Any member of a company who complain that the affairs of the company 2[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the 1[Tribunal] for an order under this section, provided such members have a right so to apply in virtue of section 399.

(2) If, on any application under sub-section (1), the Court is of opinion

(a)that the company’s affairs 2[are being conducted in a manner prejudicial to public interest or] in a manner oppressive to any member or members; and

(b)that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up,

the 1[Tribunal] may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.

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(i) The legal representatives of a deceased member whose name is still on the register of members are entitled to petition under sections 397 and 398 of the Companies Act; Worldwide Agencies Pvt. Ltd. v. Mrs. Margarat T. Desor, AIR 1990 SC 737.

(ii) The law has not defined what is ‘oppression’ for purposes of section 397 and it is left to Courts to decide on the facts of each case whether there is such oppression as calls for action under this section; Shanti Prasad Jain v. Kalinga Tubes Ltd., 1965 (35) Comp. Cas. 351: 1965 (1) Com LJ 193: AIR 1965 SC 1535.

(iii) The conduct of the majority shareholders should not only be oppressive to the minority but must also be burdensome, harsh and wrongful and continuing up to the date of petition. The lack of confidence between the majority and minority shareholders should also spring from oppression of minority in the management of the company’s affairs; Shanti Prasad Jain v. Kalinga Tubes Ltd., 1965 (35) Comp. Cas. 351: 1965 (1) Com LJ 193: AIR 1965 SC 1535.

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1. Subs. by Act 11 of 2003, sec. 44, for “Company Law Board”. Earlier the words “Company Law Board” were substituted by Act 31 of 1988, sec. 67, for the word “Court” (w.e.f. 31-5-1991).

2. Subs. by Act 53 of 1963, sec. 10, for “are being conducted” (w.e.f. 1-1-1964).

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