In Dr. Vinod K. Jain v. BSI India (P.) Ltd. (2007) 138 Comp Cas 483 (CLB)

In this case question arose – whether employment grievances or directorial complaints can be entertained in a petition under Section 397, read with section  398 of the Companies Act, 1956?

It was held that in a closely held family companies or companies in nature of quasi- partnership, if circumstances so warrant, even employment/directorial complaints of shareholders can be entertained by CLB under sections 397/398 of the Companies Act.

In this case the petitioner holding 5 percent equity shares in the respondent company filed the instant petition under section 397/398 alleging oppression and mismanagement in the company’s affairs. When the foreign shareholders/directors decided to take control of the company because of business potential of the company, petitioner apprehending his illegal removal filed civil suit seeking permanent injunction against foreign directors from removing petitioner which was pending. Petitioner filed instant petition under section 397/398 alleging that respondents, i.e  foreign directors/shareholders, were trying to remove him from directorship by unlawful means.

It was held that since substantive allegation in petition related to removal of petitioner as managing director and on basis of said issue petitioner had already filed civil suit prior in time which was pending, he could not prosecute a parallel proceeding on same issue before Bench and, consequently, instant petition was to be dismissed.