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CASE NO.: Appeal (civil)  1351 of 2008

PETITIONER: SEVERN TRENT WATER PURIFICATION, INC.

RESPONDENT: CHLORO CONTROLS (INDIA)PRIVATE LTD. & ANR.

DATE OF JUDGMENT: 18/02/2008

BENCH: C.K. THAKKER & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T

CIVIL APPEAL No.  1351       OF 2008 (@Special Leave Petition (C) No. 6161 of 2006) WITH CIVIL APPEAL NO.      1353   of 2008 (@Special Leave Petition (C) Nos. 9530 of 2006)

CHLORO CONTROLS (INDIA) PRIVATE LTD. & ANR.             . . .   Appellants

                               Versus

SEVERN TRENT WATER               PURIFICATION, INC.              . . .   Respondent

C.K. Thakker, J.          1.              Leave granted.

2.              Both these appeals have been  instituted against common judgment and order  passed by the Division Bench of the High Court  of Judicature at Bombay (Original Side) dated  February 20/21, 2006 in Appeal Nos. 449-450 of  2005 in Company Petition No. 857 of 2004.   First appeal has been filed by Severn Trent  Water Purification Inc. while the second appeal  is filed by Chloro Controls (India) Pvt. Ltd. 3.              The facts giving rise to the present  appeals, in brief as noted by the Division  Bench of the High Court are as follows. 4.              Severn Trent Water Purification Inc.,  USA (hereinafter referred to as "Severn Trent")  filed a petition for winding up the Capital  Controls (India) Private Limited (hereinafter  referred to as ’the Company’) on just and  equitable grounds under Section 433(f) of the  Companies Act, 1956 (hereinafter referred to as  ’the Act’). The learned Company Judge by his  order dated 21st April 2005 admitted the  company petition. Aggrieved thereby two appeals  came to be filed. One appeal (Appeal No. 449 of  2005) was filed by Chloro Controls (India)  Private Limited, which has 50% shareholding in  the company and the other appeal (Appeal No.  450 of 2005) was filed by the Company. As both

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the appeals arose out of one and the same order  passed by the Company Court, the appeals were  heard together and decided by a common  judgment. 5.              The petitioner set up the case in the  petition for winding up of the Company thus: (i)     Severn Trent is a Corporation organized  and existing under the laws of the State  of Pennsylvania, USA having its office  and place of business at 3000 Advance  Lane, Colmar, Pennsylvania 18915, USA. (ii)    Severn Trent was formerly known as  Capital Controls (Delaware) Company,  Inc. (iii)   In or about 1990, Severn Trent’s group  acquired Capital Controls Company, Inc.  and subsequently the name of Capital  Controls Company, Inc. was changed to  Severn Trent Water Purification, Inc.  with effect from 1st April, 2002. (iv) On March 31, 2003, Capital Controls  (Delaware) Company Inc. amalgamated with  and merged into Severn Trent and  pursuant to the merger agreement,  Capital Controls (Delaware) Company,  Inc. went out of existence. (v)     Reference to Severn Trent includes  reference to the Capital Controls  Company, Inc. as well as Capital  Controls (Delaware) Company, Inc. and,  therefore, Severn Trent in its present  name is entitled to the rights and  benefits of the Capital Controls  (Delaware) Company, Inc. and Capital  Controls Company, Inc. and to file and  maintain the company petition.  (vi)    Chloro Controls (India) Private Limited,  a company controlled by Mr. M.B. Kocha  and Capital Controls (Delaware) Company,  Inc. set up joint venture company -  Capital Controls India Private Limited  (the company) in Mumbai with the object  of manufacturing (in India) and  distributing within the geographical  boundaries of India, Nepal, Bhutan and  Afghanistan certain gas chlorination  water treatment systems and a single  product line of brine electro  chlorination system from component parts  supplied by Severn Trent. For the said  purpose, a Joint Venture Agreement was  executed by the parties on November 16,  1995. (vii)   Authorised capital of the company is  Rs.75,00,000 (Rupees seventy five lakhs)  divided into 7,50,000 equity shares of  Rs.10/- each. Severn Trent holds  3,75,000 equity shares being 50% of the  equity share capital of the company. The  other 50% of the shareholding of the  company is held by Chloro Controls  (India) Private Limited. (viii)  Chloro Controls (India) Private Limited  filed Suit No.233 of 2004 against Severn  Trent with the sole object of

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circumventing the dispute resolution  provisions in the Joint Venture  Agreement entered into between the  parties. (ix)  Due to wrongful stand and intransigence  of Chloro Controls (India) Private  Limited, there was total deadlock on  joint venture and management. Despite  several meetings between the parties and  exchange of ideas aimed at resolving  differences, relations between the  parties became more and more strain. (x)     Severn Trent, therefore, terminated the  Joint Venture Agreement vide its letter  dated July 21, 2004 due to breaches  committed by Chloro Controls (India)  Private Limited and Mr. Kocha. In the  termination notice, Severn Trent called  upon Mr. Kocha to take steps for winding  up of the company. (xi)    Severn Trent had alleged that if Mr.  Kocha would be allowed to continue to  run the company, the basic substratum of  the company would be eroded and the  company could be saddled with  liabilities leading to depletion of net  worth. (xii)   The company had been incorporated in the  nature of partnership/quasi-partnership  and both parties had equal share in the  company. The parties were severely  deadlocked on several issues, there was  total break down and Severn Trent had  lost confidence in Kochas. Severn Trent  felt that the company would not return  to the normalcy or could run the  business profitability and it was just  and equitable to wind up the company. 6.              Severn Trent, in Company Petition No.  857 of 2004, filed on September 22, 2004 in the  High Court of Judicature at Bombay under  Section 433 (f) of the Act sought the following  reliefs; (a)     That the Company viz., Capital Controls  India Private Limited, be wound up under  the just and equitable grounds by and  pursuant to the orders and directions of  the Hon’ble Court; (b)     That the Official Liquidator of this  Hon’ble Court be appointed as Liquidator  of all the assets, properties and affairs  of the Company with all powers and  authorities under the provisions of the  Companies Act, 1956; (c)     That pending the hearing and final  disposal of the petition, the Official  Liquidator of this Hon’ble Court be  appointed as Provisional Liquidator of all  the assets, properties and affairs of the  Company with all powers and authorities  under the provisions of the Companies Act  1 of 1956; (d)     That till such time that a Provisional  Liquidator is appointed by the Court, an  interim injunction be granted restraining

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the Company and/or the Kochas from doing  the following: 1.      conducting the affairs of the Company,  except by way of resolutions passed at  meetings of the Board of Directors of  the Company with the affirmative vote  of at least one direction nominated by  Severn Trent; 2.      operating the Company’s bank accounts,  except as may be jointly operated with  the authorized signatory nominated by  Severn Trent; 3.      dealing with any other assets, movable  or immovable of the Company and be  directed to preserve the machinery,  equipments, etc. installed; 4.      entering into fresh contracts in the  name of the Company and for as  representatives of the Company; 5.      making any further purchases and  payments without the consent of Severn  Trent or without approval of the Board  of Directors; 6.      borrowing monies or drawing on existing  credit facilities; 7.      paying Chloro Controls directors or  their family members monies allegedly  owed by the Company; 8.      running the website of the Company. (e)     Till the time of appointment of the  Provisional Liquidator, Mr. Kocha may be  removed from the post of Managing Director  and committees appointed by the Board may  manage the affairs of the Company; (f)     For ad-interim reliefs in terms of prayer  (c), (d) and (e) above; (h)     For such further and other reliefs as the  nature and circumstances of the case may  require; (i)     For the costs of the petition and the  order to be made thereon. 7.              The Company as well as Chloro Controls  (India) Private Limited opposed the admission  of the Company Petition. The Company objected  to the maintainability of the petition for  winding up on several grounds. It was, inter  alia, contended that (i) Severn Trent was not a  shareholder on the company’s register and,  therefore, had no standing to maintain the  petition for winding up; (ii) Capital Control  (Delaware) Corporation was the registered  holder of 50% of the equity share capital of  the Company. Merger of Capital Controls  (Delaware) Company Inc. into and with Severn  Trent was not intimated to the company prior to  the filing of Arbitration Petition No.121 of  2004 by Severn Trent under Section 9 of the  Arbitration and Conciliation Act, 1996; (iii)  at no point of time, any application for  transfer of share certificates and/or  substitution of the name of Severn Trent had  been made; (iv) the assignment of shares by the  Capital Controls (Delaware) Company, Inc. to  Severn Trent without the consent of Chloro  Controls (India) Private Limited or for that

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matter of M.B. Kocha was contrary to the  Shareholders Agreement and could not be given  effect to. 8.              Severn Trent filed a rejoinder  explaining its position regarding the merger.  Severn Trent annexed certain documents which in  its opinion were in the nature of merger  documents and submitted that the company as  well as Kochas had all along accepted Severn  Trent as shareholder and that there was no  ’assignment’ as contemplated under Clause 24 of  the Shareholders agreement and, therefore,  consent of Chloro Controls (India) Private  Limited or of Mr. Kocha was not required.  Severn Trent also asserted that it has stepped  into the shoes of Capital Controls (Delaware)  Company Inc. and was entitled to maintain a  petition for winding up of the Company. 9.              This stand of Severn Trent was  countered by the Respondents by filing sur- rejoinder wherein it was denied that Severn  Trent had stepped into the shoes of Capital  Controls (Delaware) Inc. The Company also  questioned legality and veracity of merger  documents that were relied upon by Severn  Trent.  They contended that the petition ought  to be dismissed as there was ’abuse of process  of law’ by Severn Trent in publishing premature  advertisement of company petition. 10.             The learned Company Judge by an order  dated April 21, 2005, admitted the Company  Petition indicating prima facie, the following  grounds,   1.      The shareholding of Capital Controls   (Delaware) Inc. has vested in Severn Trent  in the light of the amalgamation/merger; 2.      There was no breach of shareholders  agreement since the agreement did not  prevent the merger of two companies; 3.      The provisions of Section 439(4)(b) of the  Companies Act pertaining to devolution  through death of a former holder were  applicable in the present case, and 4.      There was complete deadlock in the  functioning of the business of the company  because there were only two shareholders and  both the shareholders were holding 50%  equity capital. Unless both the shareholders  concur in conducting the business of the  company the business could not be proceeded  with and/or carried on and the company could  not be allowed to function and run in that  way. 11.             The learned Company Judge in the light  of the above findings admitted the Company  Petition on April 21, 2005 and issued the  following directions; (i)     Petition to be admitted and  returnable on 19.8.2005.  Respondent waives service. (ii)    Petition to be advertised in Free  Press Journal, Janmabhoomi and  Maharashtra Government Gazette.  The petitioner to deposit a sum of  Rs.2,000/- in the office of the

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Prothonotary and Senior Master,  High Court, Bombay for utilization  thereof to issue the advertisement  if the petitioner fails to issue  the advertisement. 12.             Aggrieved by the decision of the  learned Company Judge, Chloro Controls  preferred Appeal No. 449 of 2005 while the  Company filed Appeal No. 450 of 2005. Both the  appeals were heard by a Division Bench of the  High Court of Bombay and disposed of by a  common judgment and order dated 20th/21st  February, 2006. The Division Bench set aside  the order of the Company Judge, holding that  Severn Trent is not entitled to file a petition  for winding up as a contributory, unless it is  registered as a member in the register  maintained by the company. It, however,  remitted the matter on the question of  maintainability in its capacity as a Creditor  of the Company to the Company Judge for  consideration. The Bench also observed that it  would be open to the respondents to oppose the  admission of the petition on all grounds,  including that of premature advertisement by  Severn Trent. 13.             Severn Trent being dissatisfied with  order in appeal, filed Special Leave Petition  (Civil) No. 6161 of 2006 in this Court. Notice  was issued on April 13, 2006 and accepted on  Caveat by the respondents.  Another Special  Leave Petition (Civil) No. 9530 of 2006 was  filed by Chloro Controls (India) against that  part of Division Bench order which left open  the issue whether Severn Trent could file  winding up petition as a Creditor and remitted  it for consideration to the learned Company  Judge. It is also aggrieved by the order passed  by the Division Bench not dismissing the  petition though Severn Trent had advertised the  Company Petition without the order of the  Company Court as required by law. In that  Special Leave Petition, notice was issued on  Aug, 22 2006 and accepted by the other side. 14.             The matters appeared on Board from  time to time. The Registry was directed to  place them for final hearing and that is how,  both the matters have been placed before us. 15.             We have heard the learned counsel  appearing on both the sides at considerable  length. We have also given most anxious and  thoughtful consideration to the rival  submissions. Primarily, three questions arise  for our consideration; 1.      Whether a winding up petition filed by  Severn Trent is maintainable in the capacity  as a contributory? 2.      Whether a winding up petition filed by  Severn Trent is maintainable in the capacity  as a creditor? 3.      Whether a winding up petition filed by  Severn Trent is liable to be dismissed at  the threshold on the ground of premature  advertisement by Severn Trent without an  order of the Court as required by law?

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1.  Whether a winding up petition filed by  Severn Trent is maintainable in the  capacity as a contributory? 16.             Before adverting to the above  question, it is necessary to keep in mind the  relevant provisions of the Act at the time  company petition was presented. Part VII of the  Act relates to ’Winding up proceedings’.  Whereas Section 425 of the Act lays down ’Modes  of winding up’, Section 433 enumerates  ’Circumstances in which a Company may be wound  up by Court’. The said section reads thus: 433. Circumstances in which company  may be wound up by Tribunal A company may be wound up by the  Tribunal,\027 (a) if the company has, by special  resolution, resolved that the company  be wound up by the Tribunal; (b) if default is made in delivering  the statutory report to the Registrar  or in holding the statutory meeting; (c) if the company does not commence  its business within a year from its  incorporation, or suspends its  business for a whole year; (d) if the number of members is  reduced, in the case of a public  company, below seven, and in the case  of a private company, below two; (e) if the company is unable to pay  its debts; (f) if the Tribunal is of the opinion  that it is just and equitable that the  company should be wound up; (g) if the company has made a default  in filing with the Registrar its  balance sheet and profit and loss  account or annual return for any five  consecutive financial years; (h) if the company has acted against  the interests of the sovereignty and  integrity of India, the security of  the State, friendly relations with  foreign States, public order, decency  or morality; (i) if the Tribunal is of the opinion  that the company should be wound up  under the circumstances specified in  section 424G: Provided that the Tribunal shall make  an order for winding up of a company  under clause (h) on application made  by the Central Government or a State  Government. 17.             Section 439 of the Act permits  presentation of petition for winding up. It is  also an equally important provision and may be  quoted in extenso;  439. (1) An application to the Court  for the winding up of a company shall  be by petition presented, subject to  the provisions of this section,\027

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(a) by the company; or

(b) by any creditor or creditors,  including any contingent or  prospective creditor or creditors; or

(c) by any contributory or  contributories; or

(d) by all or any of the parties  specified in clauses (a), (b) and (c),  whether together or separately; or

(e) by the Registrar; or

(f) in a case falling under section  243, by any person authorised by the  Central Government in that behalf. (2) A secured creditor, the holder of  any debentures (including debenture  stock) whether or not any trustee or   trustees have been appointed in  respect of such and other like  debentures, and the trustee for the  holders of debentures, shall be deemed  to be creditors within the meaning of  clause (b) of sub-section (1).

(3) A contributory shall be entitled  to present a petition for winding up a  company, notwithstanding that he may  be the holder of fully paid-up shares,  or that the company may have no assets  at all, or may have no surplus assets  left for distribution among the  shareholders after the satisfaction of  its liabilities.

(4) A contributory shall not be  entitled to present a petition for  winding up a company unless-

(a) either the number of members is  reduced, in the case of a public  company, below seven, and, in the case  of a private company, below two; or

(b) the shares in respect of which he  is a contributory, or some of them,  either were originally allotted to him  or 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, or have devolved on  him through the death of a former  holder.

(5) Except in the case where he is  authorised in pursuance of clause (f)  of sub-section (1), the Registrar  shall be entitled to present a  petition for winding up a company only  on the grounds specified in clauses  (b), (c), (d), (e) and (f) of section

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433;

Provided that the Registrar shall  not present a petition on the ground  specified in clause (e) aforesaid,  unless it appears to him either from  the financial condition of the company  as disclosed in its balance sheet or  from the report of a special auditor  appointed under section 233A or an  inspector appointed under section 235  or 237, that the company is unable to  pay its debts;

Provided further that the  Registrar shall obtain the previous  sanction of the Central Government to  the presentation of the petition on  any of the grounds aforesaid.  

(6) The Central Government shall not  accord its sanction in pursuance of  the foregoing proviso, unless the  company has first been afforded an  opportunity of making its  representations, if any.

(7) A petition for winding up a  company on the ground specified in  clause (b) of section 433 shall not be  presented \026 (a) except by the Registrar or by a  contributory; or  (b) before the expiration of fourteen  days after the last day on which the  statutory meeting referred to in  clause (b) aforesaid ought to have  been held.

(8) Before a petition for winding up a  company presented by a contingent or  prospective creditor is admitted, the  leave of the Court shall be obtained  for the admission of the petition and  such leave shall not be granted \026

(a) unless, in the opinion of the  Court, there is a prima facie case for  winding up the company; and  

(b) until such security for costs has  been given as the Court thinks  reasonable.

18.             Section 439 has to be read with  Section 428 which defines the term  ’Contributory’. It reads thus: 428. Definitions of ’Contributory’.\027  The term "contributory" means every  person liable to contribute to the  assets of a company in the event of  its being wound up, and includes the  holder of any shares which are fully  paid-up; and for the purposes of all  proceedings for determining, and all

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proceedings prior to the final  determination of the persons who are  to be deemed contributories, includes  any person alleged to be a  contributory.

19.             Bare reading of Section 439 makes it  clear that it is couched in positive as well as  negative words.  Whereas sub-section (1) of the  said section permits the presentation of  application for winding up of a Company by any  person enlisted therein, it clarifies that the  said provision is ’subject to the provision’ of  the said section and, hence, the entire section  has to be read with a view to consider the  right of a person presenting a petition for  winding up of a Company. 20.             Sub-section (4) of Section 439 is in  negative form and declares that a contributory  shall not be entitled to present a petition  unless it is covered either by clause (a) or by  clause (b) of the said provision.  As regards  shares held by the contributory, clause (b)  enacts that a contributory shall not be  entitled to present a petition for winding up  of a company unless the shares in respect of  which he is a contributory have been; (i)  originally allotted to him; or (ii) 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; or  (iii) devolved on him through the death of the  former holder. 21.             Section 41 of the Act defines ’Member’  thus: 41. Definition of "member".\027(1) The  subscribers of the memorandum of a  company shall be deemed to have agreed  to become members of the company, and  on its registration, shall be entered  as members in its register of members.   (2) Every other person who agrees in  writing to become a member of a  company and whose name is entered in  its register of members, shall be a  member of the company.   (3) Every person holding equity share  capital or company   and  whose name  is entered as beneficial  owner  in   the  records  of  the  depository  shall be deemed to be a members of the  concerned company.

22.             Sub-section (2) of Section 41  referred to above clarifies that a person who  agrees in writing to become a Member of a  Company and whose name is entered in its  register  of  members,  shall be a member of  the company. 23.             Section 108 provides that a Company  shall not register transfer of  shares  unless  a proper  instrument  of  transfer  duly   stamped  and executed by  or  on  behalf  of   

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the  transferor  and by or on behalf of the  transferee and  specifying  the  name,  address   and occupation, if any, of the  transferee,   has been  delivered  to the company alongwith  necessary certificate or letter of allotment.  Section 109 deals with transfer of shares by  legal representative of deceased Member of the  Company. Section 109A relates to nomination of  shares while Section 109B provides for  transmission of shares. Section 110 requires  making of an application for registration for  transfer of shares (or other interest) of a  Member in the Company either by transferor or  by transferee. Section 111 provides legal  remedy of an appeal in case the Company refuses  to register transfer of shares or transmission  of shares by operation of law. 24.             From the above 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  sub-section (4) of Section 439.  It is nobody’s  case that clause (a) of Section 439(4) is  attracted in the instant case.  Hence, Severn  Trent can only claim the right to present a  winding up petition under clause (b) of sub- section (4) of Section 439 of the Act.  As  already seen earlier, 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. 25.             Admittedly, Severn Trent is not the  original shareholder. Eventuality (i),  therefore, has no application in the present  case.  Regarding eventuality (ii), it is an  admitted fact that the name of Severn Trent has  not been registered in the Register of the  Company. In the circumstances, it was contended  by the learned counsel for the Company before  the learned Company Judge, before the Division  Bench of the High Court as well as before us  that Severn Trent was not entitled to institute  a petition for winding up of the Company. 26.             The counsel for the parties, in this  connection, invited our attention to numerous  foreign decisions. Probably, this is the first  case before this Court of the type and, hence,  there are no precedents covering the  controversy raised before us. 27.             Before more than a century, a question  came up for consideration before an English  Court of Chancery Division in A Company, in Re,  (1894) 2 Ch 394.  In that case, a petition  against the company was presented by X who was  neither an original allottee of shares nor

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shares were registered in his name for a  particular period required by law. He thus  could not have presented the petition under  Section 40 of the Companies Act, 1867 (similar  to Section 439 of our Act). It was contended on  behalf of X that the Company allotted shares to  wrong persons who ought not to be allowed to  avail themselves of Section 40 of the Act.  It  was submitted that in equity ’what ought to  have been done must be taken as having been  done’, and X should be treated as original  allottee.   28.             Negativing the contention and holding  the petition not maintainable, Vaughan  Williams, J. stated;  "There is an express statutory  provision as to the qualification of a  contributory to present a winding up  petition, and that cannot be modified  by saying that he ought to be in a  position in which he is not. The  provisions of sect.40 are not complied  with, and I see no reason why the  company should not set up that  defence."            (emphasis supplied)

29.             In H.L. Bolton Engineering Co. Ltd.  Re., (1956) 1 All ER 799 : (1956) 2 WLR 844 :  1956 Ch 577; the Chancery Court held that  Section 224(1) of the Companies Act, 1948 was  designed to provide an ’exhaustive list’ of  those who are entitled to present a petition  for compulsory winding-up. If the petitioner is  to qualify as a person entitled to present such  a petition, it must be on the ground that he is  a contributory at the time of presentation of  petition. 30.             Relevant part of Section 224(1) reads  thus; "(1) An application to the court for  the winding-up of a company shall be  by petition presented, subject to the  provisions of this section, either by  the company or by any creditor or  creditors (including any contingent  or prospective creditor or  creditors), contributory or  contributories, or by all or any of  those parties, together or  separately:

Provided that\027

(a) a contributory shall not be  entitled to present a winding-up  petition unless\027

(i)     either the number of members is  reduced, in the case of a  private Company, below two, or,  in the case of any other  Company, below seven; or

(ii)    the shares in respect of which  he is a contributory, or some

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of them, either were originally  allotted to him or have been  held by him, and registered in  his name, for at least six  months during the eighteen  months before the commencement  of the winding-up, or have  devolved on him through the  death of a former holder\005"

31.             Section 224(1) of Companies Act, 1948  is in pari materia to sub-section (4) of  Section 439 of our Act, quoted above. 32.             Again, in Gattopardo, Ltd. Re, (1969)  2 All ER 344 : (1969) 1 WLR 619, a similar  question came up for consideration before a  Court of Appeal. Attention of the Court was  invited to a decision in A Company in Re, and  the observations of Vaughan Williams, J.  Quoting with approval the observations of  Vaughan Williams, Russel, L.J. stated; "I am left with the plain language of  the section, and I find myself  entirely able to agree with the  remarks made in the course of argument  by Vaughan Williams, J. . . I echo  those words."                                   (emphasis supplied)

33.             In J.N. 2 Ltd., Re, (1978) 1 WLR 183 :  (1977) 3 All ER 1104, the Court highlighted the  extent and applicability of Section 224 (1) of  the Companies Act, 1948.  It observed;          "There seems to be no doubt that  entry on the register is an essential  qualification for a contributory who  desires to present a petition, if he  is not the original allottee and if  the shares have not devolved on him  through the death of a former holder;  for if neither condition is satisfied,  section 224(1)(a)(ii) requires that  the shares must have been held by him  and registered in his name for at  least six months during the preceding  18 months. Plainly, if a transferee is  not and never has been on the  register, he cannot satisfy that  condition.  And it would not seem to  be an answer that he ought to have  been on the register, unless, perhaps,  the company has been ordered to place  him on the register and has disobeyed  that order.                                           (emphasis supplied) 34.             Reference was also made to leading  commentaries by well-known authors on the  subject.  In Palmer’s Company Law, (24th Edn.,  Vol. I, p.1377), the learned Author stated;          "No contributory of a company is  capable of presenting a petition  unless\027

       1. either the number of members is

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reduced below two; or

       2. the shares in respect of which  he is a contributory or some of them  were

       (a) originally allotted to him, or

(b) have been held by him and  registered in his name for at  least six months during the  eighteen months before the  commencement of the winding  up, or

(c) have devolved upon him through  the death of a former holder  [Insolvency Act, s. 124(2)].

The object of these provisions is  to prevent a person buying shares in  order to qualify himself to wreck the  Company.  "Held" means standing in the  name of the contributory petitioner.   The provisions of section 124(2) must  be applied strictly, unless, perhaps,  the company itself is in default in  allotting shares or registering a  transfer".                                                   (emphasis supplied)

35.             Another renowned author Buckley     (Buckley on the Companies Act, 14th Edn., Vol.  I, p. 537) also considered the scope of Section  224 of the Companies Act, 1948 and stated; "This section is apparently  exhaustive, so that a person not  within its ambit cannot petition,  unless authorized to do so by some  other enactment".                                   (emphasis supplied)            36.             From the above discussion, it is clear  that the provisions of the Act must be complied  with before presenting a winding up petition  under Section 439(4)(b) of the Act. 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 sub-section (4)  of Section 439 of the Act. 37.             Let us now consider some of the  decisions referred to by the learned counsel  for Severn Trent. 38.             In Bayswater Trading Co. Ltd., Re,  (1970) 1 All ER 608, a petition was presented  by an Administrator of a lady, who was a member  of the Company and whose name was struck off  from the Register. The lady was a substantial  shareholder. She died in 1964. The petitioner  was her ’personal representative’. Considering  the provisions of Section 224(1) of the  Companies Act, 1948, the Court held that  ’personal representative’ of a shareholder was

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entitled to present a petition for the winding  up of the Company, and the word ’contributory’  should be construed accordingly. It was held  that by the Chancery Court that on a true  construction of sub-section (1) of Section 224,  the words ’any member’ must be so construed as  to extend to the ’personal representative’ of a  deceased member, although not on the register  of shareholders. 39.             In our considered opinion, the ratio  in Bayswater Trading Co. does not help Severn  Trent. It was a case of ’natural person’ who  was a shareholder of the Company, whose name  had been struck off which was sought to be  restored. It was not a case of ’corporate  entity’ or ’juristic personality’. Obviously,  therefore, in case of her death, ’personal  representative’ could present a petition for  winding up of the Company and such right  available under sub-section (1) of Section 224  could not be denied. 40.             This is clear form the observations of  Buckley, J., who after reproducing sub-section  (1) of Section 224, observed; "There is nothing there to indicate  that a person on whom shares have  devolved on the death of a former  holder must have been registered as  the holder of those shares before he  is entitled to present a petition  under Section 224, and I think that  those words in the proviso of the sub- section clearly indicate that a  personal representative of a deceased  shareholder is entitled to present a  petition and that the word  ’contributory’ in this sub-section  must therefore be construed in a way  so as to extend to such a personal  representative".

41.             National Bank of Greece & Athens,  South Asia v. Metliss, (1957) 3 All ER 608 :  (1957) 3 WLR 1056 : 1958 AC 509 is also  distinguishable. There, the Greek Act governing  amalgamation of Banking Companies provided that  a new Company absorbing another Company by  amalgamation would become ’universal successor’  to the rights and liabilities in general of the  amalgamated Companies without any other  formality or act. It was, therefore, held that  the ’universal successor’ could institute an  action or an action could be continued against  him. "The persona of the deceased is  recognized as continued in the heir,  or, as it is otherwise expressed, he  is eadem personal cum defuncto. He is  no more to be regarded as a new party  introduced into a contract than is an  executor or administrator of a dead  man’s estate in English law".                                       (per Lord Keith)                                     (emphasis supplied)

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42.             It is thus clear that the decision was  based on the Greek Law governing amalgamation  of Companies. As already adverted hereinabove,  in the instant case, neither the foreign law  was pleaded nor such evidence has been produced  to prove merger/amalgamation. But even  otherwise, in our considered opinion, Severn  Trent cannot 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  is not disputed that the name of Severn Trent  has not been registered in the Register of the  Company and hence, it cannot present a petition  for winding up of the Company in the capacity  of a contributory. 43.             Toprak Enerji Sanayi A.S. v. Sale  Tilney Technology plc, (1994) 3 All ER 483 was  a case of substitution of party as plaintiff in  the place of a foreign company ceasing to exist  during the course of proceedings and was not a  case of initiating winding up proceedings. The  case in our view, therefore, is not relevant to  the controversy in present appeals. 44.             Strong reliance was placed by the  learned counsel for Severn Trent on a decision  in Patent Steam Engine Company, in Re, 1878 Ch  464 in support of the contention that a  petition for winding up can be presented by a  person who is holder of a share in the Company  although his name is not entered in the  Register at the time of presentation of  petition. In that case, an order was passed by  a Court to allot forthwith to the petitioner,  certain preferential shares of the Company and  to register them as shareholders and to issue  certificates. The order was not complied with  by the Company. When a winding up petition was  presented by the petitioner, a preliminary  objection was raised by the Company that since  the petitioner could not be said to be  shareholders as their names were not  registered, they were not entitled to institute  a petition. 45.             The contention was negatived and  petition was held maintainable by the Court. In  a brief order, Bacon, V.C. said: "In my opinion the technical  objection has no weight. The  petitioner have been declared by the  Court entitled to be shareholders, and  the company have been ordered to allot  them these shares, and to register  them as shareholders in respect of  them. These orders the company have  failed to comply with, and it is only  through their default that the  petitioners’ names were not on the  register upwards of six months ago".                                   (emphasis supplied)

46.             In our opinion, the decision in Patent  Steam Engine Company will also not help Severn  Trent herein. Firstly, the fact-situation in  that case and in the case on hand is totally

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different. There, the Court ordered the Company  to allot to the petitioners, certain specified  preferential shares and to register them as the  holders of those shares. There was non-  compliance of the order of the Court by the  Company. Based on entitlement order, the  petitioners presented a petition for winding up  of the Company which was held maintainable in  view of the fact that there was default in  carrying out the direction of the Court by the  Company. In the instant case, despite merger  and amalgamation of Capital Controls (Delaware)  Company Inc. into Severn Trent, no step has  been taken by Severn Trent for rectification of  the register and registration of shares in its  name. In our opinion, the Division Bench of the  High Court is right in observing that it cannot  be contended by Severn Trent that in view of  dispute between Severn Trent and Kochas, the  Company would not have registered shares in the  name of Severn Trent. Had Severn Trent applied  and the prayer rejected, an appropriate action  could have been taken in accordance with law.  Secondly, we have ’some’ reservation about the  proposition of law laid down in Patent Steam  Engine Company. It is debatable whether a  direction can be issued by a Court to allot  shares or to register name of a particular  person as a share-holder.  It is also doubtful  whether an objection as to maintainability of  petition can be said to be objection of a  ’technical’ nature. In fact, when Patent Steam  Engine Company was cited in Gattopardo Ltd.,  Russell, L.J. said; "I reserve for a further  occasion, consideration whether the exception  in the Patent Steam Engine case is one which is  to be supported". Thirdly, we have already held  that to present a petition for winding up of a  Company in the capacity of a ’contributory’,  the person must be eligible under clause (b) of  sub-section (4) of Section 439 of the Act. If  he does not fall in any of the categories  enumerated therein, he cannot present such  petition. We are, therefore, unable to persuade  ourselves that on the basis of the ratio laid  down in Patent Steam Engine Company, Severn  Trent must be held ’contributory’ and granted  locus standi to present a petition for winding  up of the Company. 47.             Severn Trent, no doubt, contended that  ’purposive construction’ should be given to the  provisions of Section 439 (4) of the Act and  Severn Trent must be treated as ’contributory’.  It was also submitted that Severn Trent  fulfills all the requirements of Section  439(4)(b) of the Act. On March 31, 2003,  Delaware Corporation was merged into Severn  Trent. Delaware Corporation was thus ceased to  exist and the surviving Corporation, i.e.  Severn Trent came to be substituted. All assets  and liabilities of Delaware Corporation became  the assets and liabilities of Severn Trent and  Severn Trent became the ’contributory’ within  the meaning of Section 439 (4) (b) read with  Section 428 of the Act. Severn Trent,

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therefore, could present a winding up petition.  According to the learned counsel, if strict and  literal interpretation as advanced by the  Company is accepted, a corporate entity or a  juristic personality can never become a  contributory and consequently a share-holder.   It was submitted that there was total deadlock  between the two groups.  It had not been  engineered by Severn Trent, but was the result  of illegal acts and wrongful deeds of the  Company and Kochas. It is, therefore,  impossible that the Company would register the  name of Severn Trent in the Register of Company  and extend Severn Trent an opportunity to  present a winding up petition against the  Company. 48.             We must express our inability to  uphold the contention of learned counsel. In  our judgment, sub-section (4) of Section 439 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, as observed by us, 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 sub-section  (4) of Section 439, the law provides a remedy.   In the instant case, however, no such course  has been adopted by Severn Trent.  In the  circumstances, in our opinion, it cannot be  said that the Division Bench of the High Court  was in error in holding that Severn Trent could  not be said to be a contributory to present a  winding up petition. 49.             The learned counsel for Severn Trent  finally relied upon the last part of clause (b)  of Section 439(4) contending that shareholding  of the original company (Delaware Company) had  devolved on Severn Trent through ’death’ of  that company which was a former holder. It was  also submitted that Section 430 of the Act  enacts that if a contributory dies, his legal  representatives will become contributories.  Section 431 deals with contributories in case  of insolvency of a member. Section 432 relates  to cases of winding up of a body corporate  which is a member.  The counsel urged that the  Act does not provide for a situation where a  corporate shareholder ceases to exist otherwise  than by way of winding up.  It was also  submitted that Section 394(1)(b)(iv) of the Act  speaks of dissolution of a company without  winding up.  In such situations, it is evident  that the successor-in-interest will be the  surviving entity and, as such, can be said to  be contributory for the purpose of presenting a  winding up petition. It was, therefore, urged  that Severn Trent must be held to be a  successor of the original allottee of shares,  i.e. Delaware Corporation and the party on whom  the shares have devolved, i.e. Severn Trent.  

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The situation in the present case, according to  the learned counsel, is akin to ’civil death’  of Delaware Corporation.  Since there is  ’death’ of former holder which expression would  include dissolution/winding up of a corporate  shareholder, the right to present a winding up  petition must be conceded to Severn Trent,  successor of former holder. It was submitted  that it would be incorrect to urge that the use  of expression ’he’, ’his’ or ’him’ would apply  only to natural persons and not to corporate  personalities.  If the said view is accepted,  winding up petition can never be filed by a  successor Company even if it holds shares  earlier held by the ’former holder’. 50.             The above argument weighed with the  learned Single Judge and he observed that  though Severn Trent was not the person who was  originally allotted shares nor its name was  registered in the register of the Company but  the expression ’or have devolved on him through  the death of former holder’ would get attracted  inasmuch as upon merger/amalgamation of Capital  Controls (Delaware) Company, Inc. in Severn  Trent, the former Company i.e. former holder  can be said to have been met with ’death’ and  the shares held by the said Company could be  said to have devolved on Severn Trent. If it is  so, obviously, a petition filed by Severn Trent  as a ’contributory’ was maintainable. 51.             The learned Company Judge, after  referring to Section 439(4)(d) observed as  under: "On considering the said section as  quoted above there is no manner of  doubt that a contributory is a  shareholder of the company. In fact in  cases of amalgamation the shareholding  of erstwhile company stood  automatically transferred and vested  from the transferor company to the  transferee company and thus the  transferee company becomes the  successive holder of the said shares  by operation of law".

52.             The learned Judge proceeded to  state; "Otherwise also prima-facie in my  opinion s.439(4)(b) does not restrict  the petitioner from filing the present  petition because it falls in the last  category i.e. ’or have devolved on him  through the death of a formal holder’.  These words under s.439(4)(b) prima- facie in my opinion takes into account  the situation as in the present case  whether the company has ceased to  exist by virtue of amalgamation of the  said company with the petitioner  company. The said original company has  ceased to exist and thus there is a  natural death in the eyes of law and  in view thereof by virtue of the  aforesaid words contained under

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section 439(4)(b) prima-facie in my  opinion the present petition is  maintainable and the same can be  entertained".

53.             The Division Bench again considered  the matter and observed that the analogy drawn  by the learned Company Judge was not well  founded. According to the Division Bench, the  category, "or have devolved on him through the  death of former holder" would be applicable  only to personal representative in his  individual capacity and not to corporate entity  or juristic personality. 54.             In paragraph 37 of the judgment, the  Division Bench of the High Court observed; "37. We are afraid, the analogy drawn  by the learned company Judge is wholly  fallacious. The category, "or have  devolved on him through the death of  former holder" is applicable only to  personal representative of a person  holding shares in the company in his  individual capacity. The said  expression applies to devolution of  rights on the death of natural person  and has no application to a corporate  entity or the juristic person. The  submission of Mr. Shyam Divan that  these words could also be applied to  the company which has ceased to exist  like the Courts have held that the  corporate entity was liable to be  contempt jurisdiction of the Court  does not appeal us. If we accept the  reasoning of the learned Company Judge  and the submission of the learned  senior counsel for the petitioner, it  would be tampering with the plain  language used in the last category of  clause (b) of subsection (4) of  Section 439 which we cannot do".

55.             In our opinion, 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. 56.             The word ’death’ mentioned in a  statute normally refers to the seizing of life  of a natural person. In Stroud’s Judicial  Dictionary of Words and Phrases, (Vol. I, 6th  Edn. P.610), it is stated; "Where ’death’ is mentioned in a  statute, the word generally refers to  the ceasing to live of a natural  person; it will require a strong  context to make the word include the  dissolution of an artificial entity,  e.g. a partnership or a Company".

57.             In Stewart v. Brown, 35 SLR 828, the  Court held that it was invited to interpret the

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words ’deceased debtor’ as being equivalent to  ’dissolved company’ and the word ’death’ as  being equivalent to ’dissolution of  partnership’.  The Court further held that such  interpretation could not be given. 58.             Lord M’Laron said; "I am not sure that I understand the  theory or principle of construction  under which the suggested readings are  admissible; but I think it must be a  theory in which fancy takes the place  of logic, and in which the question  proposed is, how the statute is to be  made to fit the case, and not whether  the conditions of the case fit the  statute".      (emphasis supplied) 59.             In the context of 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 of the Act.  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 sub- section (4) of Section 439 of the Act and the  Legislature, in its wisdom, excluded certain  categories of persons from being entitled to  present a petition for winding up as  contributory. As already held by us earlier,  the provision is exhaustive in nature and its  sweep cannot be extended by judicial  interpretation. Upholding of argument of Severn  Trent and conceding the right to present a  petition for winding up of a Company though it  cannot be said to be a contributory would, in  our judgment, 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 learned  counsel for Severn Trent, therefore, must be  rejected. 60.             A decision of this Court in M/s World  Wide Agencies Pvt. Ltd. & Anr. v. Margaratt.  Desor & Ors. (1990) 1 SCC 536 has no  application to the facts of the case. It was  not a case of corporate personality, but of an  individual shareholder and a claim was based by  a legal representative of the member. 61.             Saraswati Industrial Syndicate Ltd. v.  Commissioner of Income Tax, 1990 Supp SCC 675  also does not carry the case of Severn Trent  further.  In that case, the question before the  Court did not relate to locus of the petitioner  to present a petition for winding up of a  company as a contributory. 62.             Dr. Saibaba v. Bar Council of India &  Anr., (2003) 6 SCC 186 and Union of India v.  Rajiv Kumar, (2003) 6 SCC 516 lay down  principles of interpretation of statutes. These  principles are well-known and the learned  counsel for the Company did not dispute them.  They are, however, not applicable to the facts

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of the case. 63.                     For the aforesaid reasons, we  answer question No.1 in the negative and hold  that a winding up petition filed by Severn  Trent in the capacity as a contributory is not  maintainable. 2.  Whether a winding up petition filed by  Severn Trent is maintainable in the  capacity as a creditor? 64.             So far as second question is  concerned, reading of the order passed by the  learned Company Judge makes it clear that no  such argument was raised on behalf of Severn  Trent presumably because there was no occasion  for such argument inasmuch as according to the  learned Company Judge, Severn Trent could be  said to be a ’contributory’ within the meaning  of Section 439 (4)(b) of the Act and a petition  presented by Severn Trent 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 learned Company Judge was  wrong in treating Severn Trent as  ’contributory’ and granting it locus to present  a petition for winding up of Company, that an  alternative argument was raised on behalf of  Severn Trent that Severn Trent 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. 65.             The Division Bench considered the  alternative contention and in paragraph 54,  observed; "54. This aspect was not canvassed by  the petitioner before the learned  Company Judge in response to the  preliminary objection raised by the  appellants that the company petition  was not maintainable and, therefore,  not considered by the learned Company  Judge. We are of the view that this  aspect has to be considered by the  learned Company Judge before admitting  the petition for winding up on the  just and equitable grounds in the  capacity as creditor. In so far as the  reasons that have been indicated by  the learned Company judge for  admitting the petition are concerned,  we find these reasons unsustainable.  As already held by us, the petition  for winding up order as a contributory  under Section 433(f) read with Section  439(4)(b) of the Companies Act, 1956  is not maintainable. Until the  petition is legally maintainable, the  issue of deadlock in the company pales  into insignificance".

66.             It was contended on behalf of the  Company that the Division Bench has committed  an error of law in observing that the petition

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filed by Severn Trent was maintainable in the  capacity as a Creditor of the Company and in  remitting the matter before the Company Judge.  It was submitted that looking to the company  petition in its entirety and also the grounds  and prayers, it is clear that the petition was  not presented by Severn Trent as ’Creditor’ of  the Company but as a ’Contributory’. The  contention as to ’Creditor’ was raised  belatedly for the first time in argument before  the Division Bench which was an afterthought.  This is apparent from the observations of the  Division Bench in the impugned order in para 54  extracted earlier. It was, therefore, submitted  that no such argument could have been permitted  and to that extent, the order passed by the  Division Bench of the High Court deserves to be  interfered with. 67.             We have given anxious consideration to  the above submission. In our opinion, however,  it cannot be said that the Division Bench was  in error in passing the impugned order and  remitting the matter to the learned Company  Judge to consider the question as to  maintainability of company petition filed by  Severn Trent as a Creditor of the Company. In  this connection, our attention has been invited  by the learned counsel for Severn Trent to the  company petition. In para 16 of the petition,  it was stated by Severn Trent that it was also  a Creditor of the Company and ’admitted sums  owed by the Company to Severn Trent’ had not  been paid. It was further stated that the Board  of Directors of the Company and the Managing  Director had acknowledged the Company’s  liability to Severn Trent in various  communications and Board Meetings. It was  further stated that in the circumstances,  Severn Trent was constrained to issue legal  notice on August 4, 2004 demanding payment of  all outstanding dues. A copy of the demand  notice was also annexed to the company  petition. According to Severn Trent, total  amount due and payable by the Company to Severn  Trent as on July 31, 2004 came to US $  575113.29. In ground (i) also, it was the case  of the Company that there was intentional  refusal by Mr. Kocha to allow the Company to  pay its admitted debts to Severn Trent. In  paragraph 41, it was stated by Severn Trent  that it was just, equitable, necessary and in  the interest of justice and ’in order to secure  the dues of the petitioner that Provisional  Liquidator should be appointed’. 68.             It is thus clear that though the case  put forward by Severn Trent in the winding up  petition was as a ’contributory’, the factum of  the Company being Debtor and Severn Trent being  Creditor and in spite of dues being admitted by  the Company, there was non payment on the part  of the Company had been mentioned in the  petition. The learned counsel for Severn Trent  appears to be right that in view of the finding  by the learned Company Judge that the petition  instituted by Severn Trent as a ’contributory’

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was maintainable, it was no more necessary for  the learned Company Judge to consider the  question whether the company petition filed by  Severn Trent was maintainable in the capacity  as a Creditor. 69.             It was then contended by the learned  counsel for the Company that the ground for  winding up of Company under clause (f) of  Section 433 was not available to Severn Trent  in case it had presented a petition as a  Creditor of the Company. In this connection,  our attention was invited to certain decisions.  In our opinion, it would not be appropriate to  express any opinion one way or the other since  we are of the view that the Division Bench of  the High Court was not wrong in allowing Severn  Trent to argue that point before the learned  Company Judge as that point did not arise  before him earlier. We may, however, hasten to  add that we may not be understood to have  recorded a finding that the petition presented  by Severn Trent is maintainable. We clarify  that as and when the matter will be taken up by  the learned Company Judge, it will be open to  the Company to raise a contention that no such  petition as presented is maintainable in the  capacity as a Creditor. 70.             Question No. 2 is answered  accordingly. 3.      Whether a winding up petition filed by  Severn Trent is liable to be dismissed at  the threshold on the ground of premature  advertisement by Severn Trent without the  order of the Court as required by law?

71.             So far as the third question is  concerned, neither the learned Company Judge,  nor the Division Bench has decided it. Before  the learned Company Judge, no such contention  appears to have been advanced by the Company.  Before the Division Bench, it was argued that  since there was premature advertisement by the  Severn Trent without any order from the Company  Court, there was ’abuse of process of the  Court’ by Severn Trent and the petition was  liable to be dismissed only on that ground.  Before us also, the above contention was  reiterated by the learned counsel for the  Company and in support thereof, case-law has  been cited. The learned counsel for the Severn  Trent, however, submitted that the  advertisement was qualified, carefully worded  and the facts stated therein were accurate. It  was essentially a notice to creditors,  contributories and other persons intimating  about presenting of winding up petition and  there was no mala fide intention or oblique  motive in issuing the advertisement. We may  only state that since the Division Bench of the  High Court has remitted the matter to the  learned 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’, we need  not express any opinion  one way or the other.

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As observed by the Division Bench of the High  Court, at the time the company petition will be  taken up by the Company Judge for admission, it  will be open to the Company or contesting  respondent to oppose the admission on all  grounds available. 72.             Question No. 3 is answered  accordingly. 73.             For the aforesaid reasons, the appeal  filed by Seven Trent Water Purification Inc.\027 petitioner of the company petition, deserves to  be dismissed and is hereby dismissed. So far as  the appeal filed by the Chloro Controls (India)  is concerned, it is disposed of in the light of  the observations made in the judgment. 74.             On the facts and in the circumstances  of the case, all the parties are directed to  bear their own costs.