2008 (2) TMI 612 - SC - Companies Law

Court dismisses Severn Trent Water's appeal, disposes of Chloro Controls' appeal, directs parties to bear costs.

The court dismissed the appeal filed by Severn Trent Water Purification Inc. and disposed of the appeal filed by Chloro Controls (India) in light of the ... Whether Severn Trent could file winding up petition as a Creditor? Whether a winding up petition filed by Severn Trent is maintainable in the capacity as a contributory? 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? Held that:- The appeal filed by Severn Trent Water Purification Inc.— petitioner of the company petition, deserves to be dismissed. 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. 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. Issues Involved: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.Issue-wise Detailed Analysis:1. Whether a winding up petition filed by Severn Trent is maintainable in the capacity as a contributory:The court examined Section 439(4)(b) of the Companies Act, 1956, which outlines the conditions under which a contributory can present a winding up petition. The provision specifies three scenarios: (i) shares originally allotted to the contributory, (ii) shares held and registered in the contributory's name for at least six months during the eighteen months before the commencement of winding up, or (iii) shares devolved through the death of a former holder. The court noted that Severn Trent was not the original shareholder, and its name was not registered in the company's register. The court referred to various foreign judgments and legal commentaries to emphasize that entry on the register is an essential qualification for a contributory. The court concluded that Severn Trent did not meet the statutory requirements to be considered a contributory and therefore could not present a winding up petition in that capacity.2. Whether a winding up petition filed by Severn Trent is maintainable in the capacity as a creditor:The court acknowledged that this aspect was not initially considered by the learned Company Judge. The Division Bench of the High Court remitted the matter to the Company Judge to consider the petition's maintainability in Severn Trent's capacity as a creditor. The court noted that Severn Trent had mentioned in its petition that it was a creditor of the company and that the company had acknowledged its liability in various communications. The court found that the Division Bench was correct in allowing Severn Trent to argue this point before the Company Judge. However, the court clarified that it had not recorded a finding on the petition's maintainability as a creditor and that the Company could raise this contention when the matter was taken up by the Company Judge.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:The court noted that neither the learned Company Judge nor the Division Bench had decided this issue. The Division Bench had remitted the matter to the Company Judge, granting liberty to the Company to oppose the petition's admission on all available grounds, including premature advertisement. The court refrained from expressing any opinion on this issue, stating that it would be open to the Company to oppose the admission on this ground when the Company Judge took up the petition for admission.Conclusion:The court dismissed the appeal filed by Severn Trent Water Purification Inc. and disposed of the appeal filed by Chloro Controls (India) in light of the observations made in the judgment. All parties were directed to bear their own costs.