Jurisdiction of the CLB

This Supreme Court judgement on oppression and mismanagement examined, inter alia, role of the Company Law Board (CLB) in cases of sections 397/398 of the Companies Act 1956.

Honorable Supreme Court observed that jurisdiction of the CLB is wide and can grant diverse reliefs to keep the company functioning and beneficial to shareholders.

In the case, there were two directors and two shareholders. Animosity arose between them. Apex court observed that it naturally affects functioning and management of affairs of the company. None of them willing to appoint additional director. Thus there existed dead lock. Under circumstances, the CLB directed the applicant to purchase shares held by respondent at a value to be determined by a chartered valuer. On appeal the High Court came to the concurrent finding that there was no mutual trust and confidence between the parties and it was impossible to run the company smoothly and upheld ruling of the CLB.

While considering Special Leave Petition, the apex court observed that, what may not be permissible for the affairs of a public limited company or even in a private company having large number of shareholders and directors, may be permissible in the case of this nature, where a company, for all intent and purport, is a quasi-partnership concern. Further, it stated it is necessary to take a holistic approach of the matter. The Parliament, while enacting a statute, cannot think of all situations which may emerge in giving effect to the statutory provision. The principle of ‘just and equitable clause’ is essentially equitable consideration and can be applied in this nature of cases. Relying on the English case law, it was observed by the apex court that principle applied in winding up of companies that “what is important is not the interest of the applicant but the interest of the shareholders of the company as a whole”, can be applied in a case under section 397 of the Act, subject to applicability of the well known judicial safeguards.

M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Raja [2008] 83 SCL 451 (SC).

%d bloggers like this:
Verified by MonsterInsights



Chamber of Prakash K. Pandya

Advocate, Mediator and Insolvency Professional

The Bar Council of India does not permit advertisement or solicitation by advocates in any form or manner. By accessing this website, http://www.pkpandya.com, you acknowledge and confirm that you are seeking information relating to/from Chamber of Prakash K. Pandya of your own accord and that there has been no form of solicitation, advertisement or inducement by Chamber of Prakash K. Pandya or its members and associates. The content of this website is for informational purposes only and should not be interpreted as soliciting or advertisement.

The visit to this website implies your willing consent, acceptance and agreement to our terms of services including our privacy policy and cookie policy.