SUPREME COURT OF INDIA

Severn Trent Water Purification, Inc.

v.

Chloro Controls (India) (P.) Ltd.

C.K. THAKKER AND TARUN CHATTERJEE, JJ.

CIVIL APPEAL NOS. 1351 AND 1353 OF 2008

February 18, 2008

Section 439 of the Companies Act, 1956 – Winding up - Application for – Whether if a person intends to present a petition for winding up of a company as a contributory, he/it has to satisfy company court that his/its case is covered by one of eventualities contemplated by clause (b) of section 439(4) – Held, yes – Whether phrase “or have developed on him through death of former holder” would apply to natural persons, who are holding shares in their individual capacity and not to juristic entities – Held, yes – Respondent-company controlled by one ‘K’ and a foreign company ‘C’ set up a joint venture company – Subsequently, company ‘C’ amalgamated with petitioner and went out of existence – Due to alleged breaches committed by respondent and ‘K’, petitioner terminated joint venture agreement and filed petition for winding up of said company – Whether since, admittedly, petitioner was neither original shareholder of company, nor had its name been registered in register of members of company, it could not present petition for winding up of company in capacity of a contributory – Held, yes

Words & Phrases – ‘contributory’ as occurring in section 428 of the Companies Act, 1956

“or have developed on him through death of former holder” as occurring in section 439(4)(b) of the Companies Act, 1956

FACTS

The respondent-company controlled by one ‘K’ and a foreign company ‘C’, set up a joint venture company Subsequently, company ‘C’ amalgamated with the petitioner and went out of existence. However, due to alleged breaches committed by the respondent and ‘K’, the petitioner terminated the joint venture agreement and filed a petition for winding up of the company on just and equitable grounds. The respondent opposed the admission of the petition, inter alia, on the grounds that the petitioner was not a shareholder company’s register; that the merger/amalgamation of ‘C’ with the petitioner was not intimated to the company; that at no point of time, any application for transfer of share certificate and/or substitution of the petitioner’s name had been made to the company; and that the petitioner had abused the process of law by publishing premature advertisement of the company petition. The Company Judge, however, admitted the petition mainly on the ground that the provisions of section 439(4)(b) pertaining to devolution through death of a former holder were applicable in the case. On appeal preferred by the respondent, the Division Bench of the High Court set aside the order of the Single Judge, holding that the petitioner was not entitled to file a winding up petition as a contributory, unless it was registered as a member in the register maintained by the company. It, however, remitted the matter to the Company Judge to consider the question of maintainability of the petitioner’s petition in its capacity as a creditor. The Division Bench also observed that it would be open to the respondent to oppose the admission of the petition on all grounds, including that of premature advertisement by the petitioner. Aggrieved by said order, the petitioner filed appeal before the Supreme Court.

HELD

Whether a winding up petition filed by the petitioner was maintainable in the capacity as a contributory.

From the scheme of the Act, it is abundantly clear that a contributory's right to present a winding up petition must be one either under clause (a) or under clause (b) of section 439(4). It was nobody's case that clause (a) of section 439(4) was attracted in the instant case. Hence, the petitioner could only claim the right to present a winding up petition under clause (b) of section 439(4). In the following three eventualities, a winding up petition can be presented by a contributory;

(i) shares must have been originally allotted to him; or(ii) shares must have been held by him and registered in his name for at least six months during the eighteen months immediately before the commencement of the winding up proceeding; or (iii) shares must have devolved on him through the death of former shareholder. [Para 24]

Admittedly, the petitioner was not the original shareholder. Eventuality (i), therefore, had no application in the instant case. Regarding eventuality (ii), it was an admitted fact that the name of the petitioner had not been registered in the register of the Company. [Para 25]

The provisions of the Act must be complied with before presenting a winding up petition under Section 439(4)(b). If a person intends to present a petition for winding up of a company as a contributory, he/it has to satisfy the Company Court that his/its case is covered by one of the eventualities contemplated by clause (b) of Section 439(4) [Para 36]

The petitioner could not be treated as or said to be 'contributory' unless and until the requirements of law, i.e., the provisions of Section 439(4)(b) have been complied with. It was not disputed that the name of the petitioner had not been registered in the register of the company and, hence, it could not present a petition for winding up of the Company in the capacity of a contributory. [Para 42]

In the instant case, despite merger and amalgamation of ‘C’ into the petitioner no step had been taken by the petitioner for rectification of the register and registration of shares in its name. The Division Bench of the High Court was right in observing that it could not be contended by the petitioner that in view of dispute between the petitioner and ‘K’ the company would not have registered shares in the name of the petitioner. Had the petitioner applied and the prayer rejected, an appropriate action could have been taken in accordance with law. [Para 46]

The contention of the petitioner that the purposive construction should be given to the provisions of section 439(4) could not be upheld. Section 439(4) is a 'self-contained Code' as to presentation of petition by a contributory. A person claiming to be a contributory and presenting a petition for winding up of a company in that capacity must fulfill the conditions laid down in the said section. Moreover, if there is omission, default or illegal action on the part of the company in not registering the name of the contributory even though he/it can be said to be a contributory by holding the shares as required by clause (b) of section 439(4), the law provides a remedy. In the instant case, however, no such course had been adopted by the petitioner. In the circumstances, the Division Bench of the High Court was justified in holding that the petitioner could not be said to be a contributory to present a winding up petition. [Para 48]

Regarding the contention of the petitioner that shareholding of ‘C’ had devolved on the petitioner though death of that company which was a former holder, Division Bench of the High Court was right in holding that the phrase "or have devolved on him through the death of former holder" would apply to natural persons who are holding shares in their individual capacity and not to juristic entities. [Para 55]

The word 'death' mentioned in a statute normally refers to the seizing of life of a natural person. [Para 56]

In the context of the Company Law, winding up of a body corporate is not the same thing as or equivalent to death of a member. An individual and a body corporate expressly have been treated separately which is clear from sections 430, 431 and 432. Under the scheme of the Act, every creditor may present a petition for winding up of a company, but every contributory cannot. A contributory to be eligible and qualified to present a winding up petition must be covered by section 439(4) and the Legislature, in its wisdom, excluded certain categories of persons from being entitled to present a petition for winding up as contributory. The provision is exhaustive in nature and its sweep cannot be extended by judicial interpretation. Upholding of argument of the petitioner and conceding the right to present a petition for winding up of a company though it could not be said to be a contributory would result in re-writing of the provision. A Court of law cannot adopt a construction which would result in amendment of a statute. The contention of the therefore, must be rejected. [Para 59]

Consequently, the winding up petition filed by the petioner, in the capacity as a contributory, was not maintainable. [Para 63]

Whether a winding up petition filed by the petitioner was maintainable in the capacity as a creditor.

A reading of the order passed by the Company Judge, would make it clear that no such argument was raised by the petitioner presumably because there was no occasion for such argument inasmuch as according to the Company Judge, the petitioner could be said to be a 'contributory' within the meaning of section 439 (4)(b) and a petition presented by it in that capacity was tenable. Since the order passed by the Company Judge was challenged by the company before the Division Bench and the Division Bench upheld the objection of the company and reached a conclusion that the company Judge was wrong in treating the petitioner as 'contributory' and granting it locus to present a petition for winding up of Company, that an alternative argument was raised by the petitioner that it was also a creditor of the company and in that capacity, i.e., in the capacity of a creditor, the petition for winding up of the company was maintainable. [Para 64]

It could not be said that the Division Bench was in error in passing the impugned order and remitting the matter to the Company Judge to consider the question as to maintainability of company petition filed by the petitioner as a creditor of the company. [Para 67]

Whether a winding up petition filed by the petitioner was liable to be dismissed at the threshold on the ground of premature advertisement by it without the order of the Court as required by law.

Since the Division Bench of the High Court had remitted the matter to the Company Judge and granted liberty to the Company to oppose admission of the Company petition on all available grounds including the ground of 'premature advertisement', there was no need to express any opinion one way or the other on the said question. [Para 72]

Consequently, the appeal filed by petitioner deserved to be dismissed and was to be dismissed. [Para 73]