# SEVERN TRENT WATER PURI., INC v. CHLORO

- **Citation:** [2008] 2 S.C.R. 1127
- **Court:** Supreme Court of India
- **Decided:** 2008-02-18
- **Case number:** Civil Appeal No. 1351 of 2008
- **Bench:** C.K. Thakker, Tarun Chatterjee
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/severn-trent-water-puri-inc-v-chloro-24213
- **Pages:** 42

## Headnote

Companies Act, 1996; Ss.425, 430, 431, 432, 433(1) and
439:
Winding up petition - A foreign company and an Indian c.
company setting up a Joint Venture company - Joint Venture
Agreement - Indian company filing a suit against the foreign
company circumventing dispute resolution provision in the
agreement - Dead Jock in management of Joint Venture -
Termination of agreement and filing of winding up petition by D
> ,..
appellant-foreign company - Allowed by Company Judge
holding it to be maintainable - Filing of appeals by constituent
company-Partly allowedby Division Bench of the High Court
as not maintainable as 'contributory' but remitting the matter
to Company Judge on question of maintainability of the
E
petition on ground of-capacity of appellant company as creditor
-Appeal.and cross appeal- Held: S.439 of the Act couched
in positive as· well as negative words - Sub-section (1) of
Section 439 permitting all the persons, as enlisted, to file
~~
petition for winding up of the company- However, sub-section
F
(4) of Section 439 declares that a contributory cannot file such
petition unless shares in respect of which he is contributing
have been originally allotted to him or held by him and
registered in his name or devolved on him through former
~
holder after his death - Since appellant-foreign company did G
>-
not put forth its claim under provisions of clause (a) of s. 439( 4 ),
it could only make such claim in terms of clause (b) of s.439(4)
- Since appellant company not registered in the Register of
the company, it is not entitled to file the winding up petition -
1127
H
--
1128
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A Division Bench of the High Court rightly held that the phrase :f
"have devolved on him through the death of the holder' in part
(iii) of section 439(4) would apply to natural person and not to
juristic person where death normally refers to seizing a life of
natural person -Provision uls.439(4) exhaustive in nature and
B its sweep cannot be extended by judicial interpretation -
Hence, winding up petition by appellant-company in its
capacity as contributory not maintainable.
y
Maintainability of the winding up petition in the capacity
of the appellant as Creditor - Held: In terms of the decision of
c Division Bench of. the High Court, appellant could raise
contention before the Company Judge as to maintainability
of the petition in the capacity as a creditor and also on the
ground of premature advertisement.
D
Words and Phrases:
'Have devolved on him' and 'death' - Meaning of in the
.., .
context of s.439 (4) of the Companies Act, 1956.
Appellant, formerly known as Capital Control
E (Delaware) Company, was organized and existing under
the, laws of the State of Pennsylvania, USA. Later, it
acquired another company, namely, Capital Controls
Company, Inc. Both the companies amalgamated.
Appellant-company alleged that it is entitled to the rights
F
and benefits of both the companies, so amalgamated and
also to file and maintain the company petition against
y
respondents. Respondent No.1 is an Indian company
controlled by one 'K' and Capital Controls (Delaware)
Company, Inc. is one of the constituent companies of the
appellant. They set up a joint venture company with
G Capital Controls India Private Limited with the object of
manufacturing in India and distributing within the
~
geographical boundaries of India and neighboring
countries certain gas chlorination water treatment
systems and a single product line of brine electro
H chlorination system from component parts supplied by
t
SEVERN TRENT WATER PURI., INC. v. CHLORO
1129
CONTROLS (I) P. LTD. & ANR.
the appellant company. In pursuance thereof, a Joint A
Venture Agreement was executed by the parties. Appellant
company holds 50% equity shares of the equity share
capital of the joint company, remaining 50% of the shares
were held by respondent No.1. Respondent-company filed
a suit against the appellant-company with the sole object B
of circumventing the dispute r

## Text

_Characters 0–39,871 of 78,290. This is a partial read: ask again with offset=39871 for what follows._

[2008] 2 S.C.R. 1127
~
SEVERN TRENT WATER PURIFICATION, INC.
A
II.
CHLORO CONTROLS (INDIA) PRIVATE LTD. & ANR.
(Civil Appeal No. 1351 of 2008)
FEBRUARY 18, 2008
B
'r
(C.K. THAKKER AND TARUN CHATTERJEE, JJ.)
Companies Act, 1996; Ss.425, 430, 431, 432, 433(1) and
439:
Winding up petition - A foreign company and an Indian c.
company setting up a Joint Venture company - Joint Venture
Agreement - Indian company filing a suit against the foreign
company circumventing dispute resolution provision in the
agreement - Dead Jock in management of Joint Venture -
Termination of agreement and filing of winding up petition by D
> ,..
appellant-foreign company - Allowed by Company Judge
holding it to be maintainable - Filing of appeals by constituent
company-Partly allowedby Division Bench of the High Court
as not maintainable as 'contributory' but remitting the matter
to Company Judge on question of maintainability of the
E
petition on ground of-capacity of appellant company as creditor
-Appeal.and cross appeal- Held: S.439 of the Act couched
in positive as· well as negative words - Sub-section (1) of
Section 439 permitting all the persons, as enlisted, to file
~~
petition for winding up of the company- However, sub-section
F
(4) of Section 439 declares that a contributory cannot file such
petition unless shares in respect of which he is contributing
have been originally allotted to him or held by him and
registered in his name or devolved on him through former
~
holder after his death - Since appellant-foreign company did G
>-
not put forth its claim under provisions of clause (a) of s. 439( 4 ),
it could only make such claim in terms of clause (b) of s.439(4)
- Since appellant company not registered in the Register of
the company, it is not entitled to file the winding up petition -
1127
H
--
1128
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A Division Bench of the High Court rightly held that the phrase :f
"have devolved on him through the death of the holder' in part
(iii) of section 439(4) would apply to natural person and not to
juristic person where death normally refers to seizing a life of
natural person -Provision uls.439(4) exhaustive in nature and
B its sweep cannot be extended by judicial interpretation -
Hence, winding up petition by appellant-company in its
capacity as contributory not maintainable.
y
Maintainability of the winding up petition in the capacity
of the appellant as Creditor - Held: In terms of the decision of
c Division Bench of. the High Court, appellant could raise
contention before the Company Judge as to maintainability
of the petition in the capacity as a creditor and also on the
ground of premature advertisement.
D
Words and Phrases:
'Have devolved on him' and 'death' - Meaning of in the
.., .
context of s.439 (4) of the Companies Act, 1956.
Appellant, formerly known as Capital Control
E (Delaware) Company, was organized and existing under
the, laws of the State of Pennsylvania, USA. Later, it
acquired another company, namely, Capital Controls
Company, Inc. Both the companies amalgamated.
Appellant-company alleged that it is entitled to the rights
F
and benefits of both the companies, so amalgamated and
also to file and maintain the company petition against
y
respondents. Respondent No.1 is an Indian company
controlled by one 'K' and Capital Controls (Delaware)
Company, Inc. is one of the constituent companies of the
appellant. They set up a joint venture company with
G Capital Controls India Private Limited with the object of
manufacturing in India and distributing within the
~
geographical boundaries of India and neighboring
countries certain gas chlorination water treatment
systems and a single product line of brine electro
H chlorination system from component parts supplied by
t
SEVERN TRENT WATER PURI., INC. v. CHLORO
1129
CONTROLS (I) P. LTD. & ANR.
the appellant company. In pursuance thereof, a Joint A
Venture Agreement was executed by the parties. Appellant
company holds 50% equity shares of the equity share
capital of the joint company, remaining 50% of the shares
were held by respondent No.1. Respondent-company filed
a suit against the appellant-company with the sole object B
of circumventing the dispute resolution provisions in the
Joint Venture Agreement entered into between the parties.
Due to wrongful stand and intransigence of the
respondent-company, there was total deadlock on the
management of joint venture. Appellant-company c
terminated the Joint Venture Agreement and th•:m filed a
petition for winding up under Section 433(f) of the
Companies Act, 1956. The Company Judge admitted the
petition. Aggrieved thereby, an appeal was filed by
respondent No.1 on the ground that it has 50% 0
shareholding in the company and the other appeal was
filed by the Capital Controls (India) Ltd. before the High
Court. The Division Bench of the High Court set aside the
order of the Company Judge, holding that the appellantcompany is not eligible to file a petition for winding up of E
the Joint Venture Company as a contributory, as it was
not registered as a member in the register maintained by
the company. It, however, remitted the matter to the
Company Judge on the question of maintainability in its
capacity as a Creditor. Hence the present appeal and the
cross appeal.
F
The questions which arose for consideration by this
Court in the present appeals were as to whether a winding
up petition filed by the appellant, a foreign company, is
maintainable in the capacity as a contributory/creditor; G
and as to whether a winding up petition filed by the
appellant was liable to be dismissed at the threshold on
the ground of premature advertisement by the appellant
company without an order of the Court as required by
law.
H
j
1130
SUPREME COURT REPORTS
[2008) 2 S.C.R.
A
Dismissing Civil Appeal No.1351 of 2008 and i ~
disposing of Civil Appeal No.1353 of 2008, the Court
HELD: 1.1 Section 439 of the Companies Act permits
presentation of petition for winding up. It is an important
B provision. Bare reading of the section makes it clear that
it is couched in positive as well as negative words.
Whereas sub-section (1) of the said section permits the -r
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
c section and, hence, the entire section has to be read with
a view to consider the right of a P.erson presenting a
petition for winding up of a Company. (Paras - 17 & 19)
[1145-G; 1146-0, E]
D
1.2 Sub-section (4) of Section 439 of the Act is in
negative form. It declares that a contributory shall not be
entitled to present a petition unless it is covered either by
-.rclause (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
'
l
E winding up of a company unless the shares in respect of
l.-
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)
F devolved on him through the death of the former holder.
)--·-
(Para - 20) [1148-F, G]
1.3 A contributory's right to present a winding up
petition must be one either under clause (a). or under
G
clause (b) of sub-section (4) of Section 439 of the
Company's Act. It is nobody's case that clause (a) of
Section 439(4) of the Act is attracted in the instant case.
...
Hence, the appellant - a 'foreign company, can only ~laim
the right to present a winding up petition under clause (b)
of sub-section (4) of Section 439 of the Act. (Para - 24)
H [1150-A, BJ
SEVERN TRENT WATER PURI., INC. v. CHLORO
1131
CONTROLS (I) P. LTD. & ANR.
1.4 A winding up petition can be presented by a A
contributory in the event of happening of three
eventualities, viz. (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 B
commencement of the winding up proceedings; or (iii)
shares must have devolved on him through the death of
former shareholder. Admittedly, appellant is not the
original shareholder. Eventuality (i), therefore, has no
application in the present case. Regarding eventuality (ii), c
it is an admitted fact that the name of the appellantcompany has not been registered in the Register of the
Company. In the circumstances, it was contended by the
counsel for the Company before the Company Judge,
Division Bench of the High Court as well as before this 0
Court that appellant-company was not entitled to institute
a petition for winding up of the Company. (Paras- 24 & 25)
[1150-A, B, C, D, E]
1.5 The provisions of the Companies Act must be
complied with before presenting a winding up petition E
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
F
439 of the Act. (Para - 36) [1154-B, C]
Bayswater Trading Co. Ltd., Re, (1970) 1 All ER 608 and
National Bank of Greece & Athens, South Asia v. Metliss,
(1957) 3 All ER 608 : (1957) 3 WLR 1056 : 1958 AC 509 -
distinguished.
t3
A Company, in Re, (1894) 2 Ch 394; H.L. Bolton
Engineering Co. Ltd. Re., (1956) 1 All ER 799: (1956) 2 WLR
844: 1956 Ch 577; Gattopardo, Ltd. Re, (1969) 2 All ER 344:
(1969) 1 WLR 619 and J.N. 2 Ltd., Re, (1978) 1 WLR 183: H
1132
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A (1977) 3 All ER 1104 - referred to.
Company Law by Palmer, 24th Edn., Vol. I, p.1377 and
Buckley on the Companies Act, 14th Edn., Vol. I, p. 537 -
referred to.
B
1.6 In the instant case, despite merger and
amalgamation of a foreign Company, no step has been
taken by the appellant-company for rectification of the
register and registration of shares in its name. Hence, the
Division Bench of the High Court is right in observing that
c it cannot be contended by the appellant-company that in
view of dispute between appellant-company and Kochas,
the Company would not have registered shares in the
name of appellant-company. Had the appellant-company
applied and rejected the prayer, an appropriate action
0
could have been taken in accordance with law. (Para -
46) [1157-E, F]
1.7 Sub-section (4) of Section 439 of the Act is a 'selfcontained Code' as to presentation of petition by a
contributory. A person claiming to be a contributory and
E 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
F 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 the appellant-company. In
the circumstances, it cannot be said that the Division
G Bench of the High Court was in error in holding that
appellant-company could not be said to be a contributory
to present a winding up petition. (Para - 48) [1159-A, B, C]
1.8 If the view of the counsel for the appellant, that
the use of expression 'he', 'his' or 'him' would apply only to
H natural persons and not to corporate personalities, is
r--
t
-.r-- t
f-l
i
'of!
..
y-'
).c
/.
I l
,.
..__
r
r
~
SEVERN TRENT WATER PURI., INC. v. CHLORO
1133
CONTROLS (I) P. LTD. & ANR.
.... •)
accepted, winding up petition can never be filed by a A
successor Company even if it holds shares earlier held
by the 'former holder'. The said argument weighed with
the Single Judge of the High Court who observed that
though the appellant was not the person who was'
originally allotted shares nor its name was registered in
B
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,
the foreign company in the appellant-company, the former
Company i.e. former holder can be said to have been met
with 'death' and the shares held by the said Company ,C
could be said to have devolved on the appellant-company.
If it is so, obviously, a petition filed by the appellant- '
company as a 'contributory' was maintainable. (Paras -
49 & 50) [1160-A, B, C, D, E]
D
~).·
1.9 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' E
mentioned in a statute normally refers to the seizing of life
"
of a natural person. (Paras - 53 & 56) [1161-C; 1162-B]
..i.
Stewart v. Brown, 35 SLR 828 - referred to .
-·~
Stroud's Judicial Dictionary of Words and Phrases, (Vol. I,
F
6th Edn. P.610) - referred to.
1.10 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 G
~
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
I"
contributory to be eligible and qualified to present a
\
winding up petition must be covered by sub-section (4)
H
1134
SUPREME COURT REPORTS
[2008) 2 S.C.R.
A 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. The
provision is exhaustive in nature and its sweep cannot .
be extended by judicial interpretation. Upholding of
B argument of the appellant and conceding the right to
present a petition for winding up of a Company though it
cannot be said to be a contributory would result in rewriting of the provision. A Court of law cannot adopt a
construction which would result in amendment of a
c statute. Hence, question No.1 is answered in the negative
holding that a winding up petition filed by the appelalnt in
the capacity as a contributory is not maintainable. (Paras
"
- 59 & 63) [1162-G; 1163-A, B, C, G]
Mis. World Wide Agencies Pvt. Ltd. & Anr. v. Margaratt.
D Desor & Ors. (1990) 1 SCC 536; Saraswati Industrial
Syndicate Ltd. v. Commissioner of Income Tax, 1990 Supp
~-
SCC 675; Dr. Saibaba v. Bar Council of India & Anr., (2003) 6
SCC 186 and Union of India v. Rajiv Kumar, (2003) 6 SCC
516 - held inapplicable.
E
2.1 According to the Company Judge, appellantcompany could be said to be a 'contributory' within the
i
meaning of Section 439 (4)(b) of the Act and a petition
~
presented by it in that capacity was tenable. The order
·,..
F
passed by the Company Judge was challenged by the
Company before the Division Bench of the High Court
"'·-
and the Division Bench upheld the objection of the
Company and reached a conclusion that the Company
Judge was wrong in treating it as 'contributory' and
granting it locus to present a petition for winding up of
G Company, that an alternative argument was raised on
behalf of the appellant-company that it was also a Creditor
-'
of the Company and in that capacity i.e. in the capacity of
j,
a Creditor, the petition for winding up of the Company was
~
maintainable. (Para - 64) [1164-B, C, D]
H
SEVERN TRENT WATER PURI., INC. v. CHLORO
1135
CONTROLS (I) P. LTD. & ANR.
2.2 It cannot be said that the Division Bench of the A
I
High Court 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 appellant-company as a Creditor of
the Company. (Para - 67) [1165-E]
s
2.3 Though the case put forward by the appellantc om pa ny in the winding up petition was as a
'contributory', the factum of the Company being Debtor
and appellant-company being Creditor and in spite of
dues being admitted by the Company, there was non C
payment on the part of the Company had bee~ mentioned
in the petition. The counsel for the appellant appears to
be right in arguing that in view of the finding by the
Company Judge that the petition instituted by the
appellant-company as a 'contributory' was maintainable, D
it was no more necessary for the Company Judge to
consider the question whether the compahy petition filed
by the appellant-company was maintainable in the
capacity as a Creditor. However, this Court hastens to add
that it may not be understood to have recorded a finding E
that the petition presented by the appellant-company is
maintainable. It is clarified that as and when the matter
will be taken up by the 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.
F
(Paras - 68 & 69) [1166-C, D, E, G; 1167-A]
3. So far as third question is concerned, neither the
Company Judge nor the Division Bench of the High Court
has decided it. Since the Division Bench of the High Court
has remitted the matter to the Company Judge and granted G
liberty to the Company to oppose admission of the
Company petition on all available grounds including the
ground of 'premature advertisement', no opinion on the
issue has been expressed one way or the other. Before
the Company Judge, it will be open to the Company or' H
)_
1136
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A contesting respondent to oppose the admission on all
1~
grounds available. (Para - 71) [1167-C, F, G]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1351
of 2008.
B
From the common Judgment and Order dated 20-21/02/
2006 of the High Court of Judicature at Bombay in Appeal Nos.
449 and 450/2005 in C.P. No. 857/2004.
WITH
c
Civil Appeal No. 1353 of 2008.
.....
Harish Salve, Dhruv Mehta, Harshvardhan Jha, Yashraj
-..•
Singh Deora, Kamini Ahuja, Kamaldeep Dayal, Gayatri
Goswami, Abhinav Sang hi, Chetna Rai and Ajit Anekar (for M/
S. K.L. Mehta & Co.), for the Appellant.
D
F.S. Nariman, Jay Munim, Naval, Ruby Singh Ahuja, Manu
Aggarwal, Jai Singh Barar and Manik Karanjawala for the
--f'~
Respondents.
The Judgment of the Court was delivered by
E
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
F
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 Chiaro Controls (India) Pvt. Ltd.
3. The facts giving rise to the present appeals, in brief as
G 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
H 433(f) of the Companies Act, 1956 (hereinafter refer~d to as
SEVERN TRENT WATER PURI., INC. v. CHLORO
1137
CONTROLS (I) P. LTD. & ANR. [C.K. THAKKER, J.]
;- .,_
'the Act'). The learned Company Judge by his order dated 21st A
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'.
B
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:
c
(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. D
~-t-
(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 E
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
F
-·-..f
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 G
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.
H
1138
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A
(vi)
Chloro Controls (India) Private Limited, a company
i .-4
controlled by Mr. M.B. Kocha and Capital Controls
. •
(Delaware) Company, Inc. set up joint venture
\
company - Capital Controls India Private Limited (the
f
company) in Mumbai with the object of manufacturing
~
B
(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
c
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
D
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
-t,-,
shareholding of the company is held by Chloro
Controls (India) Private Limited.
E
(viii) Chiaro Controls (India) Private Limited filed Suit
No.233 of 2004 against Severn Trent with the sole
object of circumventing the dispute resolution
'
provisions in the Joint Venture Agreement entered
""
F
into between the parties.
(ix)
Due to wrongful stand and intransigence of Chloro
-y--
Controls (India) Private Limited, there was total
deadlock on joint venture and management. Despite
several meetings between the parties and exchange
G
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 Chiaro Controls (India)
H
Private Limited and Mr. Kocha. In the termination
SEVERN TRENT WATER PURI., INC. v. CHLORO
1139
CONTROLS (I) P. LTD. & ANR. [C.K. THAKKER, J.]
notice, Severn Trent called upon Mr. Kocha to take A
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 B
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 c
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 0
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;
E
(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
F
G
all powers and authorities under the provisions of H
l
1140
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A
the Companies Act 1 of 1956;
i ;\
(d)
That till such time that a Provisional Liquidator is,
appointed by the Court, an interim injunction be
granted restraining the Company and/or the Kochas
B
from doing the following:
1.
conducting the affairs of the Company, except
by way of resolutions passed at meetings of
ythe Board of Directors of the Company with the
affirmative vote of at least one direction
c
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;
D
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
E
Company and for as representatives of the
Company;
5.
making any further purchases and payments
without the consent of Severn Trent or without
F
approval of the Board of Directors;
6.
borrowing monies or drawing on existing credit
r-- ..
facilities;
7.
paying Chiaro Controls directors or their family
members monies allegedly owed by the
G
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
H
of Managing Director and committees appointed by
SEVERN TRENT WATER PURI., INC. v. CHLORO
1141
CONTROLS (I) P. LTD. & ANR. [C.K. THAKKER, J.]
, .~ ~
the Board may manage the affairs of the Company;
A
(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.
B
7. The Company as well as Chiaro Controls (India) Private
Limited opposed the admission of the Company Petition. The G
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 D
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, E
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 Chiaro Controls (India) Private Limited or for that matter of F
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 G
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. H
1142
SUPREME COURT REPORTS
[2008] 2 S.C.R.
A 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
B 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
c
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,
D
1.
The shareholding of Capital Controls (Delaware) Inc.
has vested in Severn Trent in the light of the
-+A
amalgamation/merger;
2.
There was no breach of shareholders agreement
E
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
F
case, and
)r .. A
4.
There was complete deadlock in the functioning of
the business of the company because there were
only two shareholders and both the shareholders
G
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.
H
11. The learned Company Judge in the light of the above
}
SEVERN TRENT WATER PURI., INC. v. CHLORO
1143
CONTROLS (I) P. LTD. & ANR. [C.K. THAKKER, J.]
.... ; 't
findings admitted the Company Petition on April 21, 2005 and
A
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,
B
~
Janmabhoomi and Maharashtra Government
Gazette. The petitioner to deposit a sum of Rs.2,000/
- in the office of the Prothonotary and Senior Master,
High Court, Bombay for utilization thereof to issue
the advertisement if the petitioner fails to issue the c
advertisement.
12. Aggrieved by the decision of the learned Company
Judge, Chiaro 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 D
' tand 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 E
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 F
advertisement by Severn Trent.
'
13. Severn Trent being dissatisfied with order in appeal,
filed Special Leave Petition (Civil) No. 6161 of2006 in this Court.
Notice was issued on April 13, 2006 and accepted on Caveat
G
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
H
1144
SUPREME COURT REPORTS
[2008] 2 S.C.R.
I
A
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.
B
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
c 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?
D
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
E
ground of premature advertisement by Severn Trent
without an order of the Court as required by law?
1. Whether a winding up petition filed by Severn Trent
is maintainable in the capacity as a contributory?
I
'
F
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 theAct relates to
'Winding up proceedings'. Whereas Section 425 of the Act lays
down 'Modes of winding up', Section 433 enumerates
G '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
H
A company may be wound up by the Tribunal,-
}
SEVERN TRENT WATER PURI., INC. v. CHLORO
1145
CONTROLS (I) P. LTD. & ANR. [C.K. THAKKER, J.]
~ t ).
(a) if the company has, by special resolution, resolved that A
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 8
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 c
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 D
" tRegistrar 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, E
friendly relations with foreign States, public order, decency
or morality;
(i) if the Tribunal is of the opinion that the company sho~ld
be wound up under the circumstances specified in section
F
)-
~
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 G
->
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 H
{
1146
SUPREME COURT REPORTS
(2008] 2 S.C.R.
A
provisions of this section,-
..,,
~·
(a) by the company; or
(b) by any creditor or creditors, including any contingent or
prospective creditor or creditors; or
B
(c) by any contributory or contributories; or
(d) by all or any of the parties specified in clauses (a), (b).
1"'
and (c), whether together or separately; or
c
(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
D
trustees have been appointed in respect of such and other
like debentures, and ·the trustee for the holders of
-t ...
debentures, shall be deemed to be creditors within the
meaning of clause (b) of sub-section (1).
E
(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
F
satisfaction of its liabilities.
'r "!
(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
!'-
G
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
F
have been held by him, and registered in his name, for at
H
least six months during the eighteen months immediately

1148
A
SUPREME COURT REPORTS
[2008] 2 S.C.R.
(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.
B
18. Section 439 has to be read with Section 428 which
c
D
defines the term 'Contributory'. It reads thus:
428. Definitions of 'Contributory'.- 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 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 subsection (1) of the said section permits the presentation of
E 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.
F
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
G 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
H on him through the death of the former holder.
t
t
I
+·-'1
I·
..
j
/; r
*
SEVERN TRENT WATER PURI., INC. v. CHLORO
1149
CONTROLS (I) P. LTD. & ANR. [C.K. THAKKER, J.]
'
~ )-
21. Section 41 of the Act defines 'Member' thus:
A
41. Definition of "member".-(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 B
members .
. ,,
(2) Every other person who agrees in writing to become
1
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 c
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 D
.. t
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.