Supreme Court of
Severn Trent Water
Purification, Inc.
v.
Chloro Controls (
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 devolved 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 devolved 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 on the 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 to the instant 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 the grounds, including that of premature advertisement of the company
petition 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. [
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 members the company. [
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
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. [
In the instant case, despite merger and
amalgamation of ‘C’ with the petitioner, no steps 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. [
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 fulfil 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. [
Regarding the contention of the petitioner
that shareholding of ‘C’ had devolved on the petitioner through death of that
company which was a former holder, the 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. [
The word ‘death’ mentioned in a statute
normally refers to the seizing of life of a natural person. [
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 contributories. 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 petitioner, therefore, must be rejected. [
Consequently, the winding up petition filed by
the petitioner, in the capacity as a contributory, was not maintainable. [
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 an 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. [
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. [
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. [
Consequently, the appeal filed by the
petitioner was to be dismissed. [
Case Review
Chloro Controls (
World Wide Agencies (P.) Ltd. v. Margarat Desor [1990] 1 SCC 536; Saraswati
Industrial Syndicate Ltd. v. CIT [1990] Suppl.
SCC 675; Dr. Saibaba v. Bar Council of
India [2003] 6 SCC 186 and Union of India v. Rajiv
Kumar [2003] 6 SCC 516 distinguished on facts [Paras
60, 61 and 62, respectively].
nn