A STUDY ON WINDING UP OF A COMPANY

SUBMITTED TO:

Ms Navita Aggarwal
Faculty, Corporate Law, H.N.L.U., Raipur

SUBMITTED BY:

Ruchika Jha
Roll No. 129, Section B
Semester VI, B.A.LL.B (Hons.)

SUBMITTED ON:
1​st​ APRIL 2019

HIDAYATULLAH NATIONAL LAW UNIVERSITY

POST UPARWARA
NAYA RAIPUR CHATTISGARH
 DECLARATION

I, the undersigned, solemnly declare that this Project work titled, ​“A Study on Winding Up

of a Company”​is based on my own research work, carried out during the course of my

study, under the supervision and guidance of my faculty advisor.

I assert that the statements made and the conclusions drawn are the outcome of the said

research work. It further declares that, to the best of my knowledge and belief, proper

references have been given and it does not contain any part of any work which has been

submitted for the award of any other degree in this university or any other university.

Ruchika Jha
Semester VI
Roll No 129, Section B;
B.A. L.L.B (Hons)
 AKNOWLEDGEMENTS

I feel highly elated to work on the topic ​“A Study on Winding Up of a Company.”

The practical realization of this project has obligated the assistance of many persons. I
express my deepest regard and gratitude for Ms.Navita Aggarwal. Her consistent supervision;
constant inspiration and invaluable guidance have been of immense help in understanding
and carrying out the nuances of the project report.

I would like to thank my family and friends without whose support and encouragement, this
project would not have been a reality.

I take this opportunity to also thank the University and the Vice Chancellor for providing
extensive database resources in the Library and through Internet. I would be grateful to
receive comments and suggestions to further improve this project report.

Ruchika Jha
Semester VI
 Roll No 129, Section B
B.A. L.L.B(Hons)

TABLE OF CONTENTS

INTRODUCTION……………………………………………………………………………………...1
OBJECTIVES OF THE STUDY……………………………………………………………………….2
SCOPE OF THE STUDY……………………………………………………………………………....2
METHODOLOGY OF THE STUDY………………………………………………………………….3
ORGANISATION OF THE STUDY…………………………………………………………………..3
CHAPTERIZATION…………………………………………………………………………………...4
MODES OF WINDING UP…………………...​ ……………………...………………………......…...7
COMPULSORY WINDING UP …....…………………….…………………...……….……………...9
PETITIONERS FOR WINDING UP OF COMPANY………………………………………………14
PROCEDURE FOR WINDING UP………………………………………………………………..…16
VOLUNTARY WINDING UP……………………………………………………………………..…19
IMPACT OF I.B.C, 2016 ON WINDING UP………………………………………………………...22
CONCLUSION………………………………………………………………………………………..24
REFERENCES………………………………………………………………………………………..25
 INTRODUCTION
1
In the words of Pennington winding up or liquidation is the process by which the
management of a company’s affairs is taken out of its directors’ hands, its assets are realised
by a liquidator, and its debts and liabilities are discharged out of the proceeds of realisation
and any surplus of assets remaining is returned to its members or shareholders.

According to Halsburry's Laws of England, “​Winding up is a proceeding by means of which

the dissolution of a company is brought about & in the course of which its assets are
collected and realised; and applied in payment of its debts; and when these are satisfied, the
remaining amount is applied for returning to its members the sums which they have
contributed to the company in accordance with Articles of the Company.​ ”

Winding up of a company might be required because of various reasons including conclusion

of business, misfortune, bankruptcy, passing endlessly of promoters, and so forth., The
methodology for winding up of a company can be initiated intentionally by the shareholders
or creditors or by a Tribunal. On introduction of the winding up application, the court in the
wake of hearing the request of has the ability to either expel it or to make an interim request
as it thinks suitable. It can even appoint the temporary liquidator of the company till the
passing of winding up arrange. It can even appoint the temporary liquidator of the company
till the passing of winding up arrange. It might even make a request for winding up with or
without cost. It is a procedure by which the properties of the company are directed for the
advantage of its members and creditors. The individual designated for directing the

1
. Pennington’s Company Law, 5th Edition, Page 839
advantages and liabilities is called Liquidator. If there should be an occurrence of obligatory
winding up, the outlet is delegated by the Tribunal under section 275 of the Act; or, if there
should be an occurrence of voluntary winding up, the outlet is selected by the company itself
under section 310 of the Act.

With the enactment of the Insolvency and Bankruptcy Code, 2016, it has become difficult to
apply provisions simultaneously and to decide precedence. The IBC has also included a lot of
amendments to the Act. The Code and Regulations provide a favourable framework for
companies and limited liability partnerships. Though the process remains almost similar to
previous regime, but the major change has taken place in initiation of winding up process.

OBJECTIVES OF THE STUDY

Given the above perspective, the major objective of the study is to understand and analyse the
Winding up of Company under Act of 2013.The specific objectives are:

❖ To study the meaning of winding up of a company.

❖ To analyse the mode of winding up.

❖ To interpret the provisions regarding the voluntary winding up; and finally

❖ To understand the impact of insolvency & bankruptcy code 2016 on winding up.

SCOPE OF THE STUDY

The scope of study includes the purview within which the project work lies. The subject
explores themeaning of winding up of a company.Further, it elucidates the modes of winding
up under the company act. It also tries to understand the impact of insolvency & bankruptcy
code 2016 on winding up.This topic has been clearly enunciated with the help of articles from
magazines, newspapers and other such e-article databases that have been explored.
 METHODOLOGY OF THE STUDY

The research methodology used in the project is both analytical and descriptive in nature.
Descriptive research, as its name suggests, describes the state of affairs as it exists at
present. It merely describes the phenomenon or situation under study and its
2
characteristics.

This project is largely based on secondary and electronic sources of data. Internet and other
references such as magazines have also been used. As the project is a case study descriptive
method is the foremost method to use.

The project also has analytical research as it analyses facts or information already available
and makes their analysis to make a critical evaluation of the situation.

ORGANISATION OF THE STUDY

The study has been organized into eighth sections. The first section deals with the
introduction to the process of winding up of company followed by objectives and the
methodology adopted to carry out the study. The second section deals with the modes of

2
Jayanta Ghosh, Legal Research Methodology ,Pg No.16
winding up of company. The third section deals withthe compulsory winding up by the
tribunal.The fourth section deals with the procedure and formalities to be fulfilled in winding
up of a company. The fifth section deals with the process of voluntary winding up of
company.The sixth section impact of Insolvency and Bankruptcy code, 2016 on the Company
Act. The seventh section deals with conclusion, references and bibliography.

CHAPTERIZATION

CHAPTER I:​ WINDING UP OF COMPANY

CHAPTER II:​ MODES OF WINDING UP

CHAPTER III:​ COMPULSORY WINDING UP

CHAPTER IV:​ PETITIONERS FOR WINDING UP OF COMPANY

CHAPTER V:​ PROCEDURE FOR WINDING UP

CHAPTER VI:​ VOLUNTARY WINDING UP

CHAPTER VII:​ IMPACT OF I.B.C, 2016 ON WINDING UP

 CHAPTER I: WINDING UP OF COMPANY
Winding up is the strategy for consummation, or dissolving, a business. The winding up
action incorporates offering all advantages, paying off creditors, and dispersing remaining
resources for the accomplished partners or shareholders. Winding up can allude to dissolving
either a company or an organization.

A company can't bite the dust a characteristic demise. It has an inconclusive life expectancy,
yet in the event that such reasons have risen which make it attractive to convey a conclusion
to its corporate life, at that point important legitimate components must be put into activity to
complete it. This component is the way toward winding up. It is a procedure by which the
properties of the company are directed for the advantage of its members and creditors. The
individual designated for directing the advantages and liabilities is called Liquidator. If there
should be an occurrence of obligatory winding up, the outlet is delegated by the Tribunal
under section 275 of the Act; or, if there should be an occurrence of voluntary winding up,
the outlet is selected by the company itself under section 310 of the Act. Winding up is
3
additionally alluded as Liquidation . On liquidation, the company name is erased from the

3
G.K.Kapoor, Company Law, 2013
rundown of organizations by the Registrar of organizations and the same is distributed in the
official gazette.

According to Halsbury’s Laws of England, “​Winding up is a proceeding by means of which

the dissolution of a company is brought about & in the course of which its assets are
collected and realised; and applied in payment of its debts; and when these are satisfied, the
remaining amount is applied for returning to its members the sums which they have
4
contributed to the company in accordance with Articles of the Company.​ ”

Prof. Gower defined winding up as “​Winding up of a company is a process whereby its life is
ended and its property administered for the benefit of its creditors and members. An
administrator, called liquidator, is appointed and he takes control of the company, collects
its To discuss in detail the various modes of winding up of the companies; To discuss the
grounds which throw a company in the pit of winding up situation; and To discuss about the
​ inding up of a company assets, pays its debts and finally distributes the surplus
effects of w
5
among the members in accordance with their rights​”

As of now the arrangements of winding up are represented under section 433 to 560 of the
Act, 1956. The arrangements with connection to strike off of organizations are administered
by section 560 of the Act, 1956 and that of plan of courses of action, i.e. mergers, demergers
is represented under section 391- 394 of the Companies Act, 1956. The above discover puts
in section 270 to 365 of the Act, 2013. Regarding mergers section 230 to 240 of the Act,
2013 administer the same. Be that as it may, the arrangements of Act, 2013 with deference to
the above are yet to be upheld. Further, under the Act, 2013 such procedures are to be held
before the NCLT/NCLAT, which has been constituted yet the principles relating to making of
application before it stay pending. Once the standards are in drive along with the applicable
sections of the Act, 2013 such arrangements move to NCLT. Further, the arrangements of
voluntary winding up under the ACT, 2013 have moved under the Insolvency and
6
Bankruptcy Code, 2016 which has come into statutory power on 28th day of May, 2016 .

4
Barsha Dixit, Winding Up of Company, Vinod and Kothari Company, ISBN:6734-00234
5
”.(Haniefuddin, Shaik, and Baba, n.d.; Vogelaar and Chester 1973
6
TruptiUpadhyay, Winding up of company-A statistical overview, 2016
Thus, winding up of a company is the process whereby its life is ended and its property
administered for the benefit of its creditors and members. An administrator, called a
‘liquidator’, is appointed and he takes control of the company, collects its assets, pays its
debts and finally distributes any surplus among the members in accordance with their
respective rights.

7
In the words of Pennington winding up or liquidation is the process by which the
management of a company’s affairs is taken out of its directors’ hands, its assets are realised
by a liquidator, and its debts and liabilities are discharged out of the proceeds of realisation
and any surplus of assets remaining is returned to its members or shareholders.

At the end of the winding up the company will have no assets or liabilities, and it will
therefore be simply a formal step for it to be dissolved, that is, for its legal personality as a
corporation to be brought to an end.

CHAPTER II: MODES OF WINDING UP

Winding up of a company is a process whereby its life is ended and its property administered
for the benefit of its creditors and members. An administrator, called liquidator, is appointed
and he takes control of the company, collects To discuss in detail the various modes of
winding up of the companies; To discuss the grounds which throw a company in the pit of
winding up situation; and To discuss about the effects of winding up of a company assets,
pays its debts and finally distributes the surplus among the members in accordance with their
8
rights .

With the passing of Insolvency and Bankruptcy Code, 2016, a company can now be wound
up under the Companies Act, 2013 only by the Tribunal. The concept of voluntary winding
up, as provided earlier, has been removed. Section 2(94A), as amended by the Insolvency and
Bankruptcy Code, defines the expression winding up to mean winding up under this Act or

7
Pennington’s Company Law, 5th Edition, Page 839
8
Haniefuddin, Shaik, and Baba, n.d.; Vogelaar and Chester 1973
liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable. Chapter XX of
the Act contains provisions for winding up of a company.

Winding Up by the National Company Law Tribunal (Compulsory Winding Up)

Winding-up by the Tribunal, may be ordered in cases mentioned in section 271. The Tribunal
will make an order for winding up on an application by any of the persons enlisted in section
272.

Apart from sections 271 to 303 (Part I of Chapter XX) which deal specifically with winding
9
up by the Tribunal, sections 324 to 358 (Part III of Chapter XX) , being the provisions
applicable to every mode of winding up, are also relevant to the subject of “winding up by the
Tribunal”. Sections 304 to 323, which dealt with the voluntary winding up, have been
10
deleted, with the passing of the Insolvency and Bankruptcy Code, 2016 .

Voluntary Winding Up

Hen members and creditors of a company decide to wind-up the company without the
intervention of the Tribunal, it is known as voluntary winding-up of a company. Voluntary
winding-up is very common because there are not so many restrictions in this type of
winding-up as are found in case of winding-up by Tribunal.

Insolvency and Bankruptcy Code, 2016

The code aims to consolidate and amend the laws relating to insolvency resolution of
companies and limited liability entities, partnerships and individuals, which are contained in
various enactments, into a single legislation. The main focus of this legislation is at providing
resurrection and resolution in a time bound manner for maximization of value of debtor’s
assets. The Code has put forth an overarching framework to aid sick companies to either wind
up their business or engineer a revival plan, and for investors to exit. Notably, the Code has
also empowered the operational creditors (workmen, suppliers etc.) to initiate the insolvency
11
resolution process, if default occurs .

9
Rajkumar S. Adukia, Overview of Company Law, 2013
10
Ibid 2
11
Companies Act, 2013; Key Highlights and Developments; PwC India
The code contains provisions for insolvency resolution process as well liquidation of
companies. It also provides for voluntary liquidation of companies. With the passing of the
Code, the concept of voluntary winding up of companies under the Companies Act, 2013 has
been removed. Consequently Sections 304-323 of the Act have been deleted. Likewise
Chapter XIX of the Act, dealing with the Revival and Rehabilitation of Sick Companies has
been omitted and Sections 253-269 of the Act have been deleted. Two of the grounds for
winding up by the Tribunal - due to inability to pay debts and winding up under Chapter XIX
12
- have been omitted .

CHAPTER III: COMPULSORY WINDING UP

Section 271 provides for circumstances in which a company may be wound up by Tribunal.
The section reads: “A company may be wound up by the Tribunal—

(a) if the company has, by special resolution, resolved that the company be wound up by the
Tribunal;

(b) 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;
(c) if on an application made by the Registrar or any other person authorised by the Central
Government by notification under this Act, the Tribunal is of the opinion that the affairs of
the company have been conducted in a fraudulent manner or the company was formed for

12
N.D.Kapoor, Elements Of Corporate Law, New Delhi Publication, Pg 546
fraudulent and unlawful purpose or the persons concerned in the formation or management of
its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and
that it is proper that the company be wound up;

(d) if the company has made a default in filing with the Registrar its financial statements or
annual returns for immediately preceding five consecutive financial years; or

(e) if the Tribunal is of the opinion that it is just and equitable that the company should be
wound up.

Two of the grounds for winding up by the Tribunal - Inability to pay debt and winding up
under Chapter XIX of the Act - have been deleted with the passing of Insolvency and
Bankruptcy Code.

A. Winding Up by Special Resolution(Section 271)

The company may, by special resolution, resolve that it can be wound up by the Tribunal.
The resolution may be passed for any cause whatsoever. However, Tribunal must see that the
13
winding up is not opposed to public interest or the interest of the company as a whole . The
Tribunal is also to take into account the possibility of the company to have a financial revival,
when the company is incurring loss that led the company to pass special resolution for
winding up. This clause is based on the premise that, barring other circumstances, the
shareholders themselves are the best judge to decide as to whether or not the company should
go out of existence. It is the shareholders who had formed themselves into the company and,
therefore, it is for them to dissolve the company. The directors are not entitled to file a
winding up petition without the authority of the general meeting. Of course, the directors may
14
file such a petition, subject to the general meeting ratifying their action .

The company has to call general body meeting and pass a special resolution including therein
specifically their resolve for winding up by Tribunal and setting out grounds in the
explanatory statement appended thereto as to why such winding up of the company is called

13
B. Viswanathan v. Seshasayee Paper and Boards Ltd. [1992] 73 Comp. Cas. 136 (Mad.).
14
Galway & Salt Hill Tramways Co., In re [1918] 1 IR 62/521 LG 93.
for. It may be noted that the court (now Tribunal) has a discretion in the matter and is under
15
no obligation to order winding up merely because company has so resolved .

B. Company acting against the interests of sovereignty and integrity of India or of the
security of the State or even of the friendly relations with foreign States(271):

The grounds like acting against the interests of sovereignty and integrity of India or of the
security of the State or even of the friendly relations with foreign States are
understandable given the prevailing geo-political scene and its contours, the remaining
grounds of public order, decency and morality, do not appear to belong to the same strain.
The other grounds remain a point of contention as the corporations if engage in public
indecency there are regulatory agencies which should be governing them.

C. Company Affairs conducted in fraudulent and unlawful manner

The Registrar or any other person authorized by the Central Government may make
application to the Tribunal for winding up. On such an application, the Tribunal may order
winding up on the following grounds:

(i) The affairs of the company are being conducted in a fraudulent manner; or
(ii) The company was formed for fraudulent or unlawful purpose; or
(iii) The persons concerned in the formation of the company or management of its
affairs have been guilty of fraud, misfeasance or misconduct in connection
therewith.

It may be noted that an action under sub-clause (e) can be taken by the Tribunal only on
application made to it by the Registrar or person authorized by the Central Government for
reasons specified therein. It may be noted that under section 213(b) the Tribunal is
empowered to order investigation into the affairs of a company on the grounds mentioned
therein which are similar to the grounds mentioned under sub-clause (e) as aforesaid. Under
section 224(2)(a) the Central Government may make a petition to the Tribunal for winding up
of the company.

D. Company has made a default in filing with the Registrar its financial statements:

15
New Kerala Chits & Traders (P.) Ltd. v. Official Liquidator [1981] 51 Comp. Cas. 601 (Ker.).
Section 271(d) provides a ground of winding up for default in filing financial statements or
annual returns. It is a welcome feature as non-accountability and indiscipline in running the
affairs of the company is widespread and chronic and Government companies are no
exceptions. However, to what extent the danger of being wound up will discourage rampant
indiscipline by corporate management in this regard is a matter of conjecture specially the
time frame of five consecutive years is too long a period to inflict considerable damage to the
corporate viability. This clause contains two distinct non-compliances

(i) non-filing of the financial statements and

(ii) Non-filing of annual return.

If default is made in respect of either (for consecutive five immediately preceding financial
years), this clause for winding up can be invoked. It is not necessary that default has to be for
both financial statements and annual return. If financial statements filed regularly but annual
return has not been filed for five consecutive years, the clause becomes applicable. If
converse is the case then also it becomes applicable. The test of its applicability lies in default
in either matter for consecutive five financial years. However, say default in filing annual
accounts is for two years and the same for annual returns is for three years, then this clause
cannot be invoked. Further the default has to be in respect of five ‘immediately preceding
five consecutive’ financial years. That follows is that default in the earlier years is not a
ground of winding up under this clause and also that the default must be for five consecutive
years.

E. Just and Equitable

The Tribunal may also order for the winding up of a company if it is of the opinion that it is
just and equitable that the company should be wound up. This is a separate and independent
ground for a winding up order, and for a case to be made out under it, it is not necessary that
the circumstances should be analogous to those which justify an order on one of the six other
specific grounds already dealt with. In exercising its power on this ground, the Tribunal shall
give due weightage to the interest of the company, its employees, creditors and shareholders
and the interest of the general public. The relief based on the just and equitable clause is in
the nature of a last resort when the other remedies are not efficacious enough to protect the
16
general interests of the company.

The conditions in which the courts have in the past broke down organizations on this ground
17
are as per the following :

❖ Deadlock: When there is a gridlock in the administration of a company, it is just and

18
equitable to arrange winding up.
❖ Loss of Substratum: When the company has neglected to emerge the main objects of
19
the company. The imperative outline here is the instance of ​German Date Coffee Co
, where a company was framed to manufacture coffee from dates under a patent which
was to be allowed by the Government of Germany and additionally to work different
licenses of comparative kind. The German patent was never allowed and the company
set out upon different licenses. In any case, on the appeal to of an investor, it was held
that the substratum of the company had fizzled, and it was difficult to complete the
articles for which it was framed; and, along these lines, it was just and equitable that
the company ought to be twisted up.
❖ Losses: When a company can't convey forward its business with the exception of
bearing the weight of misfortunes, at that point it is just and equitable for the company
to be twisted up. The Bombay High Court saw in the instance of ​Shah Steamship
20
Navigation Co , that the Court won't be justified in making a winding up arrange just
on the ground that the company has made misfortunes; and is likely to make assist
misfortunes.
❖ Oppression of Minority: It is just and equitable to wind up a company where the
principle shareholders have received an forceful or severe or squeezing strategy
21
towards the minority. It has been seen in ​Tivoli Free , that where in excess of
seventy for each penny of a company stores were being utilized for protests
completely expelled from anything within the memorandum and ninety-three for each

16
Gadadhar Dixit v. Utkal Flour Mills (P.) Ltd. [1989] 66 Comp. Cas. 188 (Ori.); Kiritbhai R. Patel v. Lavina
Construction & Finance Ltd. [1999] 20 SCL 158
17
(McPherson 1964)
18
Ibid 9
19
[(1882) 20 Ch D 169]
20
(1901) 10 Bom LR 107]
21
[(1972) VR 445]
 penny of the shareholders wished to separate themselves from the new protests, the
company was requested to be twisted up.
❖ Fraudulent Purpose: If the company has been imagined and brought forward in
misrepresentation or for unlawful purposes, at that point it is just and equitable to
wind up the company. In ​Universal Mutual Aid and Poor Houses Assn versus A.D.
22
Thoppa Naidu the Madras High Court watched, where the main protest of a
company is the direct of a lottery, the negligible fact that a portion of its articles were
humanitarian won't keep the company from being requested to be ended up as being
one shaped for an unlawful reason.
❖ Open interest is likewise another vital ground, based on which the court can arrange
the winding up of the company. On a similar ground, a request of winding up go by
the Tribunal can be renounced moreover

22
AIR 1933 Mad 16]
 CHAPTER IV: PETITIONERS FOR WINDING
UP OF COMPANY
The concept for ‘Compulsory Winding- Up’ of a Company’ or ‘Winding-Up by Tribunal’
raises the question, who may be a petitioners and what procedure has been laid down
according to the Companies Act. So for the same, an application with the subject of
‘Winding-Up’ of a Company, may be made by the followings as laid down in Section 272 by
the company; any contributory or contributories ; all or any of the persons specified in
clauses (a) and (b); the Registrar; with previous approval of CG; any person authorized by the
Central Government in that behalf; or in a case falling under clause (b) of section 271, by the
Central Government or a State Government.

Company as Petitioner (272(a)): Company may present a petition for “Compulsory

23
Winding- Up’’ if a special resolution has been passed to that effect . When a petition is to be
presented on a ground other than special resolution, an ordinary resolution may be enough
authorising the Managing Director, or Directors, or the shareholders to present it and a
special resolution is not necessary, however, the latter sometimes becomes a controversial
matter.

Contributory or contributories as Petitioners (272(b)):​A contributory shall be entitled to

present the petition only if the shares were originally allotted to him; or he has held his shares
for at least 6 months during the 18 months immediately preceding the commencement of
winding up; or the shares have been devolved on him by reason of the death of a member. A
contributory shall be entitled to present a petition for the winding up of a company,
notwithstanding that he may be the holder of fully paid-up shares; or the company may have
no assets at all; or the company may have no surplus assets left for distribution among the
shareholders after the payment of its liabilities.

​ he Registrar shall be entitled to present a petition for winding up only on

Registrar (272(d)):T
the following grounds

❖ Company acting against the security of the country etc.

23
Re Orissa Trunks & Enamel Works Ltd. (1973) 43 Comp. Cas. 503
 ❖ Where the affairs of the company have been conducted fraudulently
❖ Non-filing of financial statements or annual returns by the company

The Registrar shall obtain the previous approval of the Central Government before making a
petition for winding up. Further, the Central Government shall not grant the approval to the
Registrar unless the company has been given a reasonable opportunity of making
representations.

​ ny person authorised
The Central Government or a State Government (272 (e) and (f)): A
by the central government or​, if the petition is made on the ground that the company has
acted against the interests of — a) the sovereignty and integrity of India; or b) the security of
the State; or c) friendly relations with foreign States; or d) public order; or e) decency; or f)
24
morality .

A copy of every petition made to the Tribunal for winding up of a company shall also be filed
with the Registrar. The Registrar shall submit his views to the Tribunal within 60 days of
receipt of such petition.

24
Companies Act, 2013;An Analysis of Winding up under the IBC, 2016
 CHAPTER V: PROCEDURE FOR WINDING UP

The petition to the Tribunal for the winding up of a company shall be presented by the
company, or any creditor or creditors, (including any contingent or prospective creditors),
any contributory or contributories, the Registrar, any person authorized by the Central
Government in that behalf, or by the Central Govt. or state govt. in a case falling under clause
(c) of subsection (1) of s. 271. (s.272, Companies Act, 2013).

The Tribunal may, on receipt of a petition for winding up under section 272 pass any of the
following orders, namely: (a) dismiss it, with or without costs; (b) make any interim order as
it thinks fit; (c) appoint a provisional liquidator of the company till the making of a
winding-up order; make an order for the winding up of the company with or without costs; or
any other order as it thinks fit. The order has to be made within 90 days from the date of
presentation of the petition. (S.273). Tribunal shall direct the company to file its objections
along with a statement of its affairs if a ​prima facie c​ ase for winding up exists in the eyes of
the Tribunal.

The Tribunal shall appoint A Company liquidator in accordance with s. 275, and may remove
him in accordance with s. 276 of the act. Company Liquidator as defined under s. 2(23) of the
Act, is a person appointed by the Tribunal in case of winding up by the Tribunal.

The Company Liquidator thus appointed, shall be the convener of the meetings of the
winding up committee which shall assist and monitor the liquidation proceedings in
following areas of liquidation functions, namely:- (i) taking over assets; (ii) examination of
the statement of affairs; (iii) recovery of property, cash or any other assets of the company
including benefits derived therefrom; (iv) review of audit reports and accounts of the
company; (v) sale of assets; (vi) finalisation of list of creditors and contributories; (vii)
compromise, abandonment and settlement of claims; (viii) payment of dividends, if any; (ix)
any other function, as the Tribunal may direct from time to time.

The company liquidator shall place before the Tribunal a report along with minutes of the
meetings of the committee on monthly basis duly signed by the members present at the
meeting. The Company Liquidator shall prepare the draft final report for consideration and
approval of the winding up committee. The final report so approved by the winding up
committee shall be submitted by the Company Liquidator before the Tribunal for passing of a
dissolution order in respect of the company. (S.277). Company liquidator has to submit its
report within 60 days from the order passed by the tribunal, containing various financial
details of the company, in accordance with s. 281. Powers and duties of Company Liquidator
are given in detail under s. 290, which briefly confers functional powers to the liquidator,
which are needed to resolve all the claims and liabilities of the company, so that it can be
dissolved.
Check on the Liquidators powers is provided by S. 292, the power of which is given to the
creditors or contributories, which can give him any direction at any general meeting or by the
advisory committee. The Company Liquidator also need to maintain proper records,
regarding minutes of meetings, books of account, etc. Such records may be audited on the
order of the Tribunal. (S. 293-294).

The Tribunal shall have jurisdiction to entertain, or dispose of (a) any suit or proceeding by
or against the company; any claim made by or against the company, including claims by or
against any of its branches in India; (c) any application made under section 233; (d) any
scheme submitted under section 262; any question of priorities or any other question
whatsoever, whether of law or facts, including those relating to assets, business, rights,
entitlements, … whether such suit or proceeding has been instituted or is instituted, or such
claim or question has arisen or arises or such application has been made or is made or such
scheme has been submitted, or is submitted, before or after the order for the winding up of
the company is made. (s. 280)

The tribunal also has the power to stay the process of winding up at any stage, on an
application of promoter, shareholder, or creditor, if it is satisfied, that it is just and fair that an
opportunity to revive and rehabilitate the company be provided.

The tribunal also has the power to make calls on any of the contributories, to the extent of
their liability, for payment of any money, which the tribunal considers necessary to satisfy the
debts and liabilities of the company, and the costs, charges and expenses of winding up, and
for the adjustment of the rights of the contributories among themselves. (s.296). Tribunal may
order, summon before it any officer of the company or person known or suspected to have in
his possession any property or books or papers, of the company, or known or suspected to be
indebted to the company, or any person whom the Tribunal thinks to be capable of giving
information regarding affairs, etc. of the company. (s.299), including directors, promotors
examinations also (s.300).

When the affairs of a company have been completely wound up, the Company Liquidator
shall make an application to the Tribunal for dissolution of such company. The Tribunal shall
on an application filed by the Company Liquidation under subsection (1) of section 302, is of
the opinion that it is just and reasonable in the circumstances of the case that an order for the
dissolution of the company should be made, make an order that the company be dissolved
from the date of the order, and the company shall be dissolved accordingly.

Section 271(1)(a) of 2013 Companies Act, which dealt with the winding up be Tribunal on
account of inability to pay debts has been omitted by Section 255 of The Insolvency and
Bankruptcy Code, 2016. The same is now dealt with in accordance with the provisions of
Section 7 to 9 of the Code, being the initiation of corporate insolvency resolution process by
financial and operational creditors.

An application to the adjudicating authority (being the National Company Law Tribunal) for
the initiation of corporate insolvency resolution process can be made only when there is a
“default” in payment of debt by a corporate person. In this regard, it is to be noted that the
term “default” has been defined in the Code to mean non-repayment of a debt, whether whole
or in part, which has become due and payable by a corporate person. This would imply that
now under the Code, insolvency resolution proceedings can be initiated even against a
financially solvent “default” under the Code. Once the application for initiation of corporate
insolvency resolution process is made and the same is accepted by the Tribunal, an
insolvency professional is appointed for conducting the corporate insolvency resolution
process. The process is required to be completed within 180 days from the date of admission
of the application by the Tribunal, on the failure of which, Tribunal may pass an order for the
liquidation of the corporate person in relation to whom the application was made.

Under the Companies Act, 2013, winding up applications could be made on account of
“inability to pay debts”. The expression “inability to pay debts” has been interpreted by
Andhra Pradesh High Court in the case of ​Reliance Infocomm Limited v. Sheetal Refineries
Private Limited, ​to mean a situation where a company is commercially insolvent, i.e. the
existing and provable assets would be insufficient to meet the existing liabilities. Therefore, a
remedy to initiate winding up proceedings against financially solvent companies that had
defaulted in payment of debts was not available under the earlier regime. However, this is
now feasible under The Insolvency and Bankruptcy Code, 2016.

It must be noted that, if a petition is made to NCLT with a ground under s.271(1)(a), the
procedures which NCLT will adopt will be according to the Insolvency and Bankruptcy
Code, 2016, and not only according to the Indian Companies Act, 2013.

CHAPTER VI: VOLUNTARY WINDING UP

When members and creditors of a company decide to wind-up the company without the
intervention of the Tribunal, it is known as voluntary winding-up of a company. Voluntary
winding-up is very common because there are not so many restrictions in this type of
winding-up as are found in case of winding-up by Tribunal. This has been omitted by the
Insolvency and Bankruptcy Code, 2016 w.e.f 15​th​ November 2016.

The Companies Act, 2013

Section 304 lays down that a company may be wound up voluntarily in either of the
following two ways:

● If the company in general meeting passes a resolution requiring the company to be

wound up voluntarily as a result of the expiry of the period for its duration, if any,
fixed by its articles or on the occurrence of any event in respect of which the articles
provide that the company should be dissolved; or
● If the company passes a special resolution that the company is wound up voluntarily.
Section 305 obligates on the director or directors of the company to make a declaration,
stating that they have made a full inquiry into the affairs of the company and they have
formed an opinion that the company has no debt or whether it will be able to pay its debts in
full from the proceeds of assets sold in voluntary winding up or not. Any director of a
company making a declaration under this section without having reasonable grounds for such
opinion, shall be punishable with imprisonment for a term which shall not be less than 3
years but which may extend to five years or with fine which shall not be less than 50,000
Rupees, but which may extend to three lakh rupees, or with both.

Section 306 mandates a company to call up a meeting of creditors, either on the same day or
on next day. The Board of Directors have to present a full statement of the position of the
affairs of the company, with a copy of the declaration made under section 305, and the
estimated amount of the claims, with a list of creditors of the company, before such meeting.
If two-thirds in value of creditors of the company are of the opinion that it is in the interest of
all parties that the company is wound up voluntarily, then only the company shall be wound
up voluntarily. But, if the creditors decide that Company is wound by the Tribunal in
accordance with the provisions of Part I of Chapter XX of Companies Act, 2013, the
company shall have to make an application before the Tribunal within fourteen days. The
provision also provides penalty both for the company and for defaulting director.

Where a company has passed a resolution for voluntary winding up and a resolution under
sub-section (3) of section 306 is passed, the company has to publish a notice of the resolution
by advertisement in the Official Gazette and also in a newspaper in the district where the
registered office of the company is situated. (S. 307)

In the case of a voluntary winding up, the company shall from the commencement of the
winding up cease to carry on its business except as far as required for the beneficial winding
up of its business.

Insolvency and Bankruptcy Code, 2016

The Central Government notified section 59 of the Insolvency and Bankruptcy Code, 2016,
on 30​th​Match 2017. This provision of the code provides for the procedure to be followed in a
voluntary winding up process. Subsequently, the Insolvency and Bankruptcy Board of India
has notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process)
Regulations, 2016, by exercising its powers accorded by Section 59, 106 and 208, read with
Section 240 of the code, on 31​st​March 2017.

The recently notified section 59 stipulates that any corporate person can voluntarily liquidate
itself if it has not committed any default, may initiate voluntary liquidation proceedings under
the provisions of the Code.
The Board can make specific provisions regulating voluntary liquidation proceedings, but
these proceedings must include according to s. 59(3) of the act, a declaration from majority of
the directors of the company verified by an affidavit stating that, they have made a full
inquiry into the affairs of the company and they have formed an opinion that either the
company has no debt or that it will be able to pay its debts in full from the proceeds of assets
to be sold in the voluntary liquidation; and the company is not being liquidated to defraud any
person. The declaration has to be accompanied with, audited financial statements and records
of business operations of the company for the previous two years or for the period since its
incorporation, whichever is later; a report of the valuation of the assets of the company, if any
prepared by a registered valuer.

Within four weeks of a declaration, there shall be a special resolution of the members of the
company in general meeting requiring the company to be liquidated voluntarily and
appointing an insolvency professional to act as the liquidator; or a resolution of the members
of the company requiring the company to be liquidated voluntarily as a result of expiry of
period of its duration and appointing an insolvency professional to act as the liquidator. This
resolution has to be passed and approved by creditors representing two-thirds in value of the
debt of the company. The company has to then notify the Registrar of Companies and the
Board within seven days of such resolution.

Under the Code, only an insolvency Professional can be appointed as a liquidator, and other
requirements under regulation include, that both the insolvency professional and entity to
which he belongs, has to be independent of the corporate person. Independence shall be there
in the following circumstances:

● If he is eligible to be appointed as an independent director on the board of the

corporate person (company) under section 149 of the Companies Act, in the last three
financial years.

● Is not related to the company in the last 3 financial years.

● Was neither an employee, partner, proprietor in any of the company’s auditors, cost
auditors or company’s secretaries firms, nor of a legal or consulting firm, which had
any transaction with the corporate person which led the corporate person contributing
25
10% or more of the gross turnover of such firm in the last three financial years .

25
A.K. Gupta, Voluntary Winding up, SKP Business Consulting PPP
 The liquidator’s rights and duties are provided in the code, under s. 35-53.

Where the affairs of the corporate person/company have been completely wound up, and its
assets completely liquidated, the liquidator shall make an application to the Adjudicating
Authority (NCLT) for the dissolution of such corporate person.

CHAPTER VII: IMPACT OF I.B.C, 2016 ON

WINDING UP
The Insolvency and Bankruptcy Code, 2016 merge and change the laws relating to
insolvency of organizations, association firms, and constrained obligation organization into a
single enactment. It intends to give time bound resolution and enabled the creditors to initiate
the insolvency resolution process if default happens. After the MCA wide warning no. S.O.
3453 E of November fifteenth, 2016, section 255 of Insolvency and Bankruptcy Code, 2016
changed following sections of the Companies Act, 2013.

In the definition of Winding up, new insertion was made which makes it as winding up
implies winding up under this Act or liquidation under the Insolvency and Bankruptcy Code,
2016 as pertinent. Section 270 of the Companies Act, 2013 regarding the Modes of winding
up, has been erased after the requirement of this Code. It has been substituted by Winding up
by Tribunal.

Section 271 of Act, 2013 which manages Circumstances in which company might be ended
up by Tribunal has been substituted to be more specific. A company might be ended up by
the Tribunal, on appeal to under Section 272, if the company has settled by special resolution
that company be ended up by the Tribunal; if the company has acted against sway, integrity,
security of India inviting relations with outside states, open request, tolerability, profound
quality; if the tribunal is of opinion that acts of the company are fraudulent or the question for
which it was framed was fraudulent or unlawful or people worried in development and
administration have been held blameworthy of misrepresentation, unfortunate behaviour and
it would be legitimate for it to be twisted up; if the company defaulted in filing financial
explanation for the promptly preceding last financial years with the Registrar; if Tribunal is
of opinion that company ought to be ended up on just and equitable grounds.

The sub-section has been substituted in Section 275 of the Companies Act, 2013 as Section
275(2) which manages Company Liquidators and their appointment according to which
Tribunal should appoint the temporary or the Company Liquidator from among the
insolvency professionals enrolled under the Insolvency and Bankruptcy Code, 2016. S

ection 304 of the Companies Act, 2013 that arrangements with the conditions in which
company might be twisted up intentionally has been excluded by the Insolvency and
Bankruptcy Code, 2016 alongside different sections relating to wilfully winding up under the
Act.

On December seventh, 2016, the MCA issued Companies (Transfer of Pending Proceedings)
Rules, 2016 for exchange of pending lawful proceedings from High Court to National
Company Law Tribunal seat On March 31st, 2017 the Insolvency and Bankruptcy Board of
India has informed the Insolvency and Bankruptcy Board of India (Voluntary Liquidation
Process) Regulations, 2017. The voluntary winding up of organizations was represented by
Companies Act, 1956 as the said arrangements in Companies Act, 2013 had never been told.

Presently the Voluntary Liquidation in both the Companies Act 1956 and Companies Act,
2013 has been revoked by Government. Section V of Part II of the Insolvency and
Bankruptcy Code contains Section 59 that arrangements with voluntary liquidation. In
addition, the distinction between members' voluntary winding up and creditors' voluntary
26
winding up has been eliminated .

According to Section 59 of the Code, the voluntary liquidation process must be initiated by a
corporate individual, which has not submitted any default. Default here includes those debts

26
Lawyer and Shriram 2017
that are not reimbursed and has turned out to be expected and payable. However, there are
few prerequisites are essential.

❖ Revelation by directors that winding up isn't to swindle any individual;

❖ Liquidator can be insolvency professional who satisfies criteria under the controls;
❖ Registers to be maintained and protected in recommended way;
❖ Liquidators to get cases of partners just in determined structures;
❖ Within a year from beginning of voluntary winding up, the affairs of corporate
individual to be twisted up;
❖ Reports by Liquidator to be submitted to corporate individual, Registrar of Companies
and Insolvency and Bankruptcy Board of India.

CONCLUSION
The process of winding-up of a company is not very simple, it includes within it many
complexities and technicalities. Earlier there was only one act, which generally governed this
area, but now with the enactment of the Insolvency and Bankruptcy Code, 2016, it has
become more difficult to apply these provisions simultaneously and to decide precedence.
The Code and Regulations provide a favourable framework for companies and limited
liability partnerships. Though the process remains almost similar to previous regime, but the
major change has taken place in initiation of winding up process. Earlier, company or any of
its creditors could file a voluntary winding up petition but now company, directors,
designated partners or persons responsible for exercising its corporate powers can initiate the
winding up process. Moreover, approval of creditors representing two thirds of corporate debt
is mandatory under the Code for initiating voluntary winding up proceeding. It is expected
that Code would help in overcoming delays and complexities involved in the process due to
presence of four adjudicating authorities, High Court, Company Law Board, Board for
Industrial and Financial Reconstruction and Debt Recovery Tribunal. It would also lessen the
burden on courts as all the litigation will be filed under the Code. Hence, nowadays, the area
of company law has become a specialized field, because of its technicalities, but it perpetrates
other drawbacks too because the person running the company, their linkage with the legal
functioning of the company gets broken up. Hence, simple and easier laws are needed, so that
even non-legal person can know how to run company, efficiently and legally, without totally
depending on lawyers.

To sum it up, now every company who proposes to wind up is required to follow Insolvency
and Bankruptcy Code, 2016. The Code is quite comprehensive and wider as against
Companies Act, 2013.

REFERENCES
Chandratre, K. R.2016. Bharat‘s Law & Practice Relating to Oppression & Mismanagement:
Minority Shareholders' Remedies

Jain, D. K. 2017. Bharat‘s Guide to Insolvency and Bankruptcy Code: Based on the
Insolvency and Bankruptcy Code, 2016 and Rules and Regulations Notified Thereunder
Along withCommentary and Case Laws : For Resolution Professionals, Liquidators,
Financial Creditors, Operational Creditors, Corporate Debtors,
CA/CS/CMA/Consultants/advocates and Corporates.

Hannigan, Brenda, 2012, Liquidation and Dissolution-Winding up the Insolvent Company in

Company Law, 617–46.
Pradhan, Kavita.2013; Liability of Past Members during Winding Up of a Company;SSRN
Electronic Journal. ​https://doi.org/10.2139/ssrn.2330295​.

Singh, Ravi Kumar.2010. ―Insolvency, Liquidation, and Winding up Law in India: An

Urgent Need for Review, SSRN Electronic Journal. ​https://doi.org/10.2139/ssrn.1576003​.