The Indian Supreme Court recently decided a case dealing with the locus standi of a contributory to bring a petition for winding up of a company. The following is taken from the Indian Corporate Law blog, available originally here:
Recently, the Supreme Court of India in Severn Trent Inc. v. Chloro Controls (India) Pvt. Ltd. [(2008) 4 SCC 130] dealt with an interesting point of law related to the locus standi of a contributory to file a petition for winding up.
The facts of the case are clear. Chloro Controls (
It was contended that Severn Trent was not a shareholder on the company’s register and, therefore, had no standing to maintain the petition for winding up. It was further contended that at no point of time was any application for transfer of share certificates and/or substitution of the name of Severn Trent made. Severn Trent, on the other hand, asserted that it had stepped into the shoes of Capital Control (
The issue before the Supreme Court called for an interpretation of Section 439(4)(b) of the Companies Act, 1956. Under this Section, a contributory is not entitled to present a petition for winding up unless the shares in respect of which he is a contributory, or some of them, (a) were originally allotted to him; or (b) were held by him and registered in his name for a certain period; or (c) devolved on him through the death of a former holder. Severn Trent did not dispute that category (a) was inapplicable in the case; but argued that it should be held to have conformed to categories (b) and (c). Essentially, the contention was that the requirement of the shares having to be “registered in his name” was not a mandatory requirement, and could be waived in certain circumstances. Otherwise, a company (particularly in cases where two groups of shareholders are severely hostile to each other) could prevent a contributory from bringing a petition for winding up by simply refusing to register the shares in the name of the contributory. Alternatively, Severn Trent argued that the shares could be deemed to have devolved upon it through the “death” of the former holder. After the merger between Capital Control (
The Court relied on a string of English decision beginning from In Re a Company [(1894) 2
This case is significant because it is perhaps the only clear Supreme Court decision on the issue of locus standi of a contributory to bring a petition for winding up. The case now conclusively settles that Section 439(4) is an exhaustive code on the subject of winding up by contributories; and in order to present a petition for winding up, a contributory must be able to bring itself within the wordings of the categories mentioned in Section 439(4)(b); with all the categories being construed according to a strict literal meaning.