Law On Oppression Or Mismanagement U/s 397, 398 Companies Act

The latest Bombay High Court judgement in Abdul Wahid Abdul Gaffor Khatri vs. Safe Heights Developers Pvt. Ltd COMPANY APPEAL NO.22 OF 2013 explains the law on sections 397 and 398 of the Companies Act which deal with opression of the minority and mismanagement.

The Bombay High Court has held in the judgement that it is well settled, as held, inter alia, by the Hon’ble Supreme Court in 1V.S. Krishnan & Ors .v. Westfort Hi-Tech Hospital Limited & Ors. and followed in 2Purnima Manthena & Anr. v. Renuka Datla & Ors that an Appeal under Section 10-F of the Companies Act, would lie only on a question of law.

It has been pointed out in the judgement of the Bombay High Court that Section 10-F expressly states that the Appeal will lie only on a question of law arising out of the order. It is further held by the Hon’ble Supreme Court that the CLB is the final authority on facts, unless, such findings are perverse, based on no evidence or are otherwise arbitrary.

The Bombay High Court judgement further emphasizes that it is further well settled that an order passed by the CLB under Sections 397 and 398 is a discretionary order as held by the Hon’ble Supreme Court in V. S. Krishnan (supra) and in 3Sangramsinh P. Gaikwad v. Shantadevi P. Gaikwad. Being a discretionary relief, the Appellate Court, i.e. the High Court ought not to interfere with the judg- ment or replace the same with its own exercise of discretion, particu- larly given the restrictive scope of Section 10-F. Read More …