Chapter - 6

CHAPTER -6
WINDING UP AND ROLE OF LIQUIDATOR IN

WINDING UP OF COMPANIES.
162
CHAPTER-6
WINDING UP AND ROLE OF LIQUIDATOR IN WINDING UP OF

COMPANIES.
This chapter shall deal with:

 WINDING UP
 LIQUIDATORS
 STATEMENT OF AFFAIRS; TAKING POSSESSION AND INVENTORY OF
ASSETS
 MAINTENANCE OF ACCOUNT AND AUDIT
 PREFERENTIAL PAYMENT AND DISTRIBUTION DURING WINDING UP
 FRAUDULENT PRACTICES PRIOR TO AND DURING THE LIQUIDATION
PROCESS.
163
WINDING UP OF COMPANIES
The entire procedure for bringing about lawful end to the life of a company is divided into
two stages ―winding up and dissolution‖.
 WINDING UP is the first stage in the process whereby the assets are realized,
liabilities are paid off and the surplus if any is distributed among the members.
 DISSOLUTION is an act which puts an end to the life of the company.408
A company may be wound up in two ways:
 Compulsory winding up- refers to winding up by the court.
 Voluntary winding up- when a company is wound up by the members or creditors
without intervention of tribunal.409
THE GROUNDS OF COMPULSARY WINDING UP Sec.433 ARE AS FOLLOWS:410
CIRCUMSTANCES IN WHICH COMPANY MAY BE WOUND UP BY TRIBUNAL ARE

AS FOLLOWS
Sec.433 of Companies Act, 1956 reads as follows. 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 default is made in delivering the statutory report to the
Registrar or in holding the statutory meeting ; (c) if the company does not commence its
business within a year from its incorporation, or suspends its business for a whole year ; (d) if
the number of members is reduced, in the case of a public company, below seven, and in the
case of a private company, below two; (e) if the company is unable to pay its debts ; (f) if the
Tribunal is of opinion that it is just and equitable that the company should be wound up ; (g)
if the company has made a default in filing with the Registrar its balance sheet and profit and
loss account or annual return for any five consecutive financial years ; (h) if the company has
acted against the interests of the sovereignty and integrity of India, the security of the State,
friendly relations with foreign States, public order, decency or morality ; (i) if the Tribunal is
of the opinion that the company should be wound up under the circumstances specified in
408
Corporate Restructuring and Insolvency; available at:<
http://www.icsi.edu/Portals/2/guidlines/CRI%20Dec%202011.pdf> accessed on 22 november,2015
409
Ibid.
410
[Winding Up - Legal Position Under Companies Act 1956]i.e before Companies Act 2013 and Insolvency
And Bankruptcy Code, 2016 came into force.
164
section 424G :Provided that the Tribunal shall make an order for winding up of a company
under clause (h) on application made by the Central Government or a State Government.‖411
The existence of an alternative remedies, whether invoked or not, goes to defeat the plea for
winding up on this ground under Sec.433 (f).412
The petition for winding up to the court can be made by the following persons:-413
a. The company-a special resolution is necessary for the purpose if the company is
proceeding for winding up.
b. A creditor, in case of company‘s inability to pay the debts. In the case of creditors
petition the petitioner must prove that he is a creditor, if the fact is disputed by the
company or by any other creditor.414
c. A contributory-it was held in the case of Standard Aluminium & BrassWorks
Ltd;Re415
In cases where a contributory petitions for winding up of a company, the court must
from first to last keep a close eye on two things. The first is the unwillingness of the
court to interfere with shareholders in the management of their own affairs, including
the question whether the business shall be continued or not, and the second is that
there is, in fact, jurisdiction in an extreme case to wind up a company at the instance
of a contributory, notwithstanding that he is not supported by a majority of
shareholders, if it is just and equitable that the company should be wound up.
d. By all or any of the parties as specified in clause a to c above, whether together or
separately.
e. The registrar may petition for winding up in the following circumstances:
1. If default is made in delivering statutory report or holding the statutory
meeting.
2. If the corporate person does not start its business within the time span of one
year from its formation or suspended its business for an entire year.
3. If it appears to him either from monetary position of the company as revealed
by its balance sheet or from the report of special auditor appointed under
411
Sec.433 of Companies Act,1956
412
K.S.Motilal v. K.S.Kasimaris Ceramique P.ltd.,(2003)Comp Cases 562
413
Section 439 of Companies Act,1956
414
Ram kumar Agarwal v. buxar oil& Rice Mills Ltd;AIR1960 Cal764
415
(1928)30 Bom LR1509
165
Section 233-A or an inspector appointed under section 235 or 237 that the
organization can‘t pay its standing obligations.
4. Where the central government authorizes the registrar to petition for winding
up the company.
5. Where the number of members of the company fall below the statutory
minimum
6. Where it is just and equitable that the company be wound up.
However the registrar shall obtain the previous sanction of the Central
Government before the presentation of the petition on any of the grounds as
aforesaid.416
f. Any person authorized by the Central government.417
g. The Central or the state government 418 , if the company has acted against the
sovereignty, integrity or security of India or against public order, decency, morality
ethical quality, and so forth.419
It ought to be noticed that the winding up proceedings are extraordinarily influenced by the
facts and conditions of a specific case. The technique of winding up can‘t be utilized as a
pressure tactic. It is where the company takes its final gasp. The request of for winding up is
heard by the court and after that either dismissed or orders passed for winding up, if court
issues winding up orders, official liquidator assumes control over the assets and begins
realization of sale of assets of the company.
The money is distributed in order of priority and when all assets are sold, the company is
finally closed.
416
Section 439(5) of Companies Act,1956
417
Section 439(1)(f) of Companies Act,1956
418
Section 439(g) of Companies Act,1956
419
Section 433 (h) of Companies Act 1956
166
DATE OF COMMENCEMENT OF WINDING UP
Section 441 of Companies Act, 441 reads as- COMMENCEMENT OF WINDING UP BY

TRIBUNAL
―(1) Where, before the presentation of a petition for the winding up of a company by the
Tribunal, a resolution has been passed by the company for voluntary winding up, the
winding up of the company shall be deemed to have commenced at the time of the passing
of the resolution, and unless the Tribunal, on proof of fraud or mistake, thinks fit to direct
otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been
validly taken. (2) In any other case, the winding up of a company by the Tribunal shall be
deemed to commence at the time of the presentation of the petition for the winding up.‖420
The date of commencement of winding up is very important as it affects many matters. It

depends on ‗the date of commencement of winding up‘, as to whether a person, who has
ceased to be a member of the company, can be held liable as a past member, to contribute to
the company‘s assets and in respect of certain other matters. If proper books of account
have not been kept throughout the two years immediately preceding the commencement of
winding up every officer in default is liable to imprisonment up to one year, unless he can
prove that he acted honestly and that in the circumstances of a particular case the omission
was excusable.421
Section 536(2) of the Companies Act,1956 reads as ―In the case of a winding up by [the
Tribunal], any disposition of the property (including actionable claims) of the company, and
any transfer of shares in the company or alteration in the status of its members, made after
the commencement of the winding up, shall, unless the [Tribunal] otherwise orders, be
void.‖422
What orders the court may pass?
The court may pass any of the following orders on hearing the winding up petition:
 ‗Dismiss it, with or without costs.
 Adjourn the hearing conditionally or unconstitutionally
420
Section 441 of Companies Act, 441
421
Ramaiya A., Guide to Companies Act, Lexis Nexis, 16th edition, vol2 &3, (2008 )
422
Section 536(2) of the Companies Act,1956
167
 Make any interim order, as it thinks fit, or
 Pass any order for winding up of the company with or without costs, or any other
order that it thinks fit‘.423
PROCEDURE AFTER WINDING UP ORDER

In the event that the court is satisfied, that adequate reasons exist in the petition which is
made for winding up, at that point it will pass a winding up order. Once the winding up
order is passed, the following consequences take place:
1. The court will send intimation to an official liquidator and Registrar of
Companies within two weeks from date of passing of the order424.
2. The petitioner to winding up proceedings as well as the company should file with
the registrar a certified copy of the order within 30 days from the date of receipt
of certified copy of the order. Default is punishable with fine up to Rs.1,000 per
day till the default continues.425
3. On receipt of the copy, Registrar shall make a minute thereof in his books
identifying with the company, and should notify in official gazette that such an
order has been made.426
4. The winding up order shall be applicable to all the creditors and contributories, in
any case whether they have filed the winding up petition or not.
5. For the purposes of this Act, so far as it relates to the winding up of a company
by the Tribunal, there shall be an Official Liquidator who - (a) may be appointed
from a panel of professional firms of chartered accountants, advocates, company
secretaries, costs and works accountants or firms having a combination of these
professions, which the Central Government shall constitute for the Tribunal ; or
(b) may be a body corporate consisting of such professionals as may be approved
by the Central Government from time to time ; or (c) may be a whole-time or a
part-time officer appointed by the Central Government : Provided that, before
appointing the Official Liquidator, the Tribunal may give due regard to the views
or opinion of the secured creditors and workmen.427
423
424
425
Sec.445(1) of Companies Act,1956
426
445(2) of Companies Act,1956
427
Sec.448(1) of the Companies Act,1956
168
6. The company shall furnish relevant particulars, relating to, assets, cash in hand,
bank balance, particulars of creditors, liabilities etc, to the official liquidator.428
7.The Official Liquidator should within a time span of half year, from the date of
winding up order, present a primary report to the court with respect to:
• Particulars of capital
• Cash and negotiable securities
• Liabilities
• Movable and immovable properties
• Unpaid calls429
The Central Government shall take notice of the working of official liquidator, and may
expect him to answer any inquiry.430
POWER OF THE TRIBUNAL TO STAY WINDING UP
Section 466 of the Companies Act, 1956 reads as- The Tribunal may at any time after
making a winding up order, on the application either of the Official Liquidator or of
any creditor or contributory, and on proof to the satisfaction of the Tribunal that all
proceedings in relation to the winding up ought to be stayed, make an order staying the
proceedings, either altogether or for a limited time, on such terms and conditions as the
Tribunal thinks fit. (2) On any application under this section, the Tribunal may, before
making an order, require the Official Liquidator to furnish to the Tribunal a report with
respect to any facts or matters which are in his opinion relevant to the application. (3) A
copy of every order made under this section shall forthwith be forwarded by the
company, or otherwise as may be prescribed, to the Registrar, who shall make a minute
of the order in his books relating to the company.431
Section 481.of the Companies Act,1956 reads as- DISSOLUTION OF COMPANY (1)
When the affairs of a company have been completely wound up or when the [Tribunal] is of
the opinion that the liquidator cannot proceed with the winding up of a company for want of
funds and assets or for any other reason whatsoever and it is just and reasonable in the
circumstances of the case that an order of dissolution of the company should be made, the
[Tribunal] shall make an order that the company be dissolved from the date of the order, and
428
Sec.454 of the Companies Act,1956
429
Section 455(1) of the Companies Act,1956
430
431
169
the company shall be dissolved accordingly. (2) A copy of the order shall, within thirty days
from the date thereof, be forwarded by the liquidator to the Registrar who shall make in his
books a minute of the dissolution of the company. (3) If the liquidator makes default in
forwarding a copy as aforesaid, he shall be punishable with fine which may extend to [five
hundred] rupees for every day during which the default continues.432
APPEAL FROM ORDERS

Section 483 of the Companies Act, 1956 reads as-Appeals from any order made, or decision
given [before the commencement of the Companies (Second Amendment) Act, 2002], in the
matter of the winding up of a company by the Court shall lie to the same Court to which, in
the same manner in which, and subject to the same conditions under which, appeals lie from
any order or decision of the Court in cases within its ordinary jurisdiction.433
THE GROUNDS OF VOLUNTARY WINDING UP ARE AS FOLLOWS:
Section 484. of the Companies Act,1956 reads as- CIRCUMSTANCES IN WHICH

COMPANY MAY BE WOUND UP VOLUNTARILY (1) A company may be wound
up voluntarily - (a) when the period, if any, fixed for the duration of the company by
the articles has expired, or the event, if any, has occurred, on the occurrence of which
the articles provide that the company is to be dissolved, and the company in general
meeting passes a resolution requiring the company to be wound up voluntarily ; (b) if
the company passes a special resolution that the company be wound up voluntarily.
(2) In this Act, the expression "a resolution for voluntary winding up" means a
resolution passed under clause (a) or (b) of sub-section (1)434
It was held in the case of Brithish Water Gas Syndicate v. Notts Derby water Gas
Co.Ltd435 that however prosperous and solvent a company may be, if the members
wish the company to be wound up, they can do so by passing a special resolution to
that effect without giving any reasons and the statutory right can neither be interfered
by the court nor can be taken away by the articles of the company.
432
Section 481.of the Companies Act,1956
433
Section 483 of the Companies Act, 1956
434
Section 484. of the Companies Act,1956
435
1889WN204
170
The omission to convene a meeting of the creditors, under Sec.500 and subsequent
holding of thereof will not affect the date of commencement of winding up.436
MEMBERS’ VOLUNTARY WINDING UP
Sec.488.(1) of Companies Act 1956,reads as- DECLARATION OF SOLVENCY IN

CASE OF PROPOSAL TO WIND UP VOLUNTARILY (1) Where it is proposed to
wind up a company voluntarily, its directors, or in case the company has more than two
directors, the majority of the directors, may, at a meeting of the Board, make a
declaration verified by an affidavit, to the effect that they have made a full inquiry into
the affairs of the company, and that, having done so, they have formed the opinion that
the company has no debts, or that it will be able to pay its debts in full within such
period not exceeding three years from the commencement of the winding up as may be
specified in the declaration. 437
Any director of a company making a declaration under this section without having
reasonable grounds for the opinion that the company will be able to pay its debts in full
within the period specified in the declaration, shall be punishable with imprisonment
for a term which may extend to six months, or with fine which may extend to 1 [fifty]
thousand rupees, or with both.438
The declaration should be accompanied by a copy of auditor‘s report on the profit and
loss account, commencing from the date up to which the last such account was prepared
and ending with the latest practicable date immediately before the making of the
declaration, should be delivered to the registrar before passing of the resolution for
voluntary winding up u/s 484 of the Companies Act 1956.439
Commencement of Winding up
The winding up is considered to start when the resolution for winding up is passed. 440 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 so far as may be required for the beneficial winding
436
G.R.Deo v. F.Karim.(AIR1946Nag.196)
437
Sec.488(1). of Companies Act,1956
438
Sec.488(3). of Companies Act,1956
439
Section 488(2) of Companies Act,1956
440
171
up of such business : Provided that the corporate state and corporate powers of the company
shall continue until it is dissolved.441
Section 502. of the Companies Act,1956 reads as- APPOINTMENT OF LIQUIDATOR

(1) The creditors and the company at their respective meetings mentioned in section 500 may
nominate a person to be liquidator for the purpose of winding up the affairs and distributing
the assets of the company. (2) If the creditors and the company nominate different persons,
the person nominated by the creditors shall be liquidator : Provided that any director, member
or creditor of the company may, within seven days after the date on which the nomination
was made by the creditors, apply to the [Tribunal] for an order either directing that the person
nominated as liquidator by the company shall be liquidator instead of or jointly with the
person nominated by the creditors, or appointing the Official Liquidator or some other person
to be liquidator instead of the person appointed by the creditors. (3) If no person is nominated
by the creditors, the person, if any, nominated by the company shall be liquidator. (4) If no
person is nominated by the company, the person, if any, nominated by the creditors shall be
liquidator.442
SECTION 275. of COMPANIES ACT, 2013-COMPANY LIQUIDATORS AND

THEIR APPOINTMENTS443
Section 275. of Companies Act,2013 reads as follows- Company Liquidators and their
appointments.— (1) For the purposes of winding up of a company by the Tribunal, the
Tribunal at the time of the passing of the order of winding up, shall appoint an Official
Liquidator or a liquidator from the panel maintained under sub-section (2) as the Company
Liquidator. (2) The provisional liquidator or the Company Liquidator, as the case may be,
shall be appointed from a panel maintained by the Central Government consisting of the
names of chartered accountants, advocates, company secretaries, cost accountants or firms or
bodies corporate having such chartered accountants, advocates, company secretaries, cost
accountants and such other professionals as may be notified by the Central Government or
from a firm or a body corporate of persons having a combination of such professionals as
may be prescribed and having at least ten years‗ experience in company matters. (3) Where a
441
442
443
[Effective from 15th December, 2016]
172
provisional liquidator is appointed by the Tribunal, the Tribunal may limit and restrict his
powers by the order appointing him or it or by a subsequent order, but otherwise he shall
have the same powers as a liquidator. (4) The Central Government may remove the name of
any person or firm or body corporate from the panel maintained under sub-section (2) on the
grounds of misconduct, fraud, misfeasance, breach of duties or professional incompetence:
Provided that the Central Government before removing him or it from the panel shall give
him or it a reasonable opportunity of being heard. (5) The terms and conditions of
appointment of a provisional liquidator or Company Liquidator and the fee payable to him or
it shall be specified by the Tribunal on the basis of task required to be performed, experience,
qualification of such liquidator and size of the company. (6) On appointment as provisional
liquidator or Company Liquidator, as the case may be, such liquidator shall file a declaration
within seven days from the date of appointment in the prescribed form disclosing conflict of
interest or lack of independence in respect of his appointment, if any, with the Tribunal and
such obligation shall continue throughout the term of his appointment. (7) While passing a
winding up order, the Tribunal may appoint a provisional liquidator, if any, appointed under
clause (c) of sub-section (1) of section 273, as the Company Liquidator for the conduct of the
proceedings for the winding up of the company.444
Section 359. of the Companies Act,2013 reads as follows- Appointment of Official

Liquidator.— (1) For the purposes of this Act, so far as it relates to the winding up of
companies by the Tribunal, the Central Government may appoint as many Official
Liquidators, Joint, Deputy or Assistant Official Liquidators as it may consider necessary to
discharge the functions of the Official Liquidator. (2) The liquidators appointed under sub-
section (1) shall be whole-time officers of the Central Government. (3) The salary and other
allowances of the Official Liquidator, Joint Official Liquidator, Deputy Official Liquidator
and Assistant Official Liquidator shall be paid by the Central Government.445
Section 360. of the Companies Act,2013 reads as follows- Powers and functions of
Official Liquidator.— (1) The Official Liquidator shall exercise such powers and perform
such duties as the Central Government may prescribe. (2) Without prejudice to the provisions
of sub-section (1), the Official Liquidator may— (a) exercise all or any of the powers as may
be exercised by a Company Liquidator under the provisions of this Act; and (b) conduct
444
Section 275. of Companies Act,2013
445
173
inquiries or investigations, if directed by the Tribunal or the Central Government, in respect
of matters arising out of winding up proceeding.446
Section 494. of the Companies Act 1956 reads as- POWER OF LIQUIDATOR TO
ACCEPT SHARES, ETC., AS CONSIDERATION FOR SALE OF PROPERTY OF
COMPANY (1) Where - (a) a company (in this section called "the transferor-company") is
proposed to be, or is in course of being, wound up altogether voluntarily ; and (b) the whole
or any part of its business or property is proposed to be transferred or sold to another
company, whether a company within the meaning of this Act or not (in this section called
"the transferee-company") ; the liquidator of the transferor-company may, with the sanction
of a special resolution of that company conferring on the liquidator either a general authority
or an authority in respect of any particular arrangement, - (i) receive, by way of compensation
or part compensation for the transfer or sale, shares, policies, or other like interests in the
transferee-company, for distribution among the members of the transferor-company ; or (ii)
enter into any other arrangement whereby the members of the transferor-company may, in
lieu of receiving cash, shares, policies, or other like interests or in addition thereto, participate
in the profits of, or receive any other benefit from, the transferee-company. (2) Any sale or
arrangement in pursuance of this section shall be binding on the members of the transferor-
company. (3) If any member of the transferor-company who did not vote in favour of the
special resolution expresses his dissent there from in writing addressed to the liquidator, and
left at the registered office of the company within seven days after the passing of the
resolution, he may require the liquidator either - (a) to abstain from carrying the resolution
into effect ; or (b) to purchase his interest at a price to be determined by agreement, or by
arbitration in the manner provided by this section. (4) If the liquidator elects to purchase the
member's interest, the purchase money shall be paid before the company is dissolved, and be
raised by the liquidator in such manner as may be determined by special resolution. (5) A
special resolution shall not be invalid for the purposes of this section by reason only that it is
passed before or concurrently with a resolution for voluntary winding up or for appointing
liquidators ; but if an order is made within a year for winding up the company by [the
Tribunal], the special resolution shall not be valid unless it is sanctioned by the [Tribunal].
(6) The provisions of the Arbitration Act, 1940 (10 of 1940), other than those restricting the
446
174
application of that Act in respect of the subject- matter of the arbitration, shall apply to all
arbitrations in pursuance of this section.447
Duties of liquidator
Section 495. of the Companies Act,1956 reads as-DUTY OF LIQUIDATOR TO CALL
CREDITORS' MEETING IN CASE OF INSOLVENCY (1) If, in the case of a winding
up commenced after the commencement of this Act, the liquidator is at any time of opinion
that the company will not be able to pay its debts in full within the period stated in the
declaration under section 488, or that period has expired without the debts having been paid
in full, he shall forthwith summon a meeting of the creditors, and shall lay before the meeting
a statement of the assets and liabilities of the company. (2) If the liquidator fails to comply
with sub-section (1), he shall be punishable with fine which may extend to [five thousand]
rupees.448
Section 496. of the Companies Act 1956 reads as- DUTY OF LIQUIDATOR TO CALL
GENERAL MEETING AT END OF EACH YEAR (1) Subject to the provisions of
section 498, in the event of the winding up continuing for more than one year, the liquidator
shall - (a) call a general meeting of the company at the end of the first year from the
commencement of the winding up, and at the end of each succeeding year, or as soon
thereafter as may be convenient within three months from the end of the year or such longer
period as the Central Government may allow ; and (b) lay before the meeting an account of
his acts and dealings and of the conduct of the winding up during the preceding year, together
with a statement in the prescribed form and containing the prescribed particulars with respect
to the proceedings in, and position of, the liquidation. (2) If the liquidator fails to comply
with sub-section (1), he shall be punishable, in respect of each failure, with fine which may
extend to [one thousand] rupees.449
Section 497 of the Companies Act, 1956 states that -as soon as the affairs of the company
are fully wound up, the liquidator after preparing an account of the winding up, showing how
the winding up has been conducted and the property of the company has been disposed of;
447
Section 494. of the Companies Act 1956
448
449
Section 496. of the Companies Act 1956
175
should call a general meeting of the company for the purpose of laying the accounts before it.
The meeting shall be called by advertisement specifying the time; place and object of the
meeting; and the advertisement should be published not less than one month before the
meeting in Official Gazette, and in addition to this in some daily news paper circulated in the
district where the registered office of the company is situated.450
Power of the liquidator after dissolution- the liquidator‘s power comes to an end with the
dissolution and he has no power, for instance, to execute a sale deed after dissolution. The
liquidator cannot represent a non-existing company or discharge any duty or perform any
legal functions on its behalf without express legal authority. A voluntary liquidator has no
legal authority, after dissolution of the company, to execute a sale deed to complete a
transaction entered into earlier in respect of the lease hold interest of the company in certain
land. On dissolution of the company, the leasehold interest in the land vested in the
Government by escheat or bona vacantia, since there was no provision in the deed of lease
for passing of the interest to the lessee in the event of company being wound up.451
CREDITORS’ VOLUNTARY WINDING UP
The company shall cause a meeting of the creditors of the company to be called for the day,
or the day next following the day, on which there is to be held the general meeting of the
company at which the resolution for voluntary winding up is to be proposed, and shall cause
notices of the meeting of creditors to be sent by post to the creditors simultaneously with the
sending of the notices of the meeting of the company.452 The Board of directors of the
company shall - (a) cause a full statement of the position of the company's affairs together
with a list of the creditors of the company and the estimated amount of their claims to be laid
before the meeting of the creditors to be held as aforesaid ; and (b) appoint one of their
member to preside at the said meeting.453
450
Section 497 of the Companies Act, 1956
451
Narendra bahudur Tondon v. Shankar lal, AIR 1980 SC 575
452
Sec.500(1) of Companies Act,1956
453
Sec 500(3) of Companies Act,1956
176
Notice of any resolution passed at a creditors' meeting in pursuance of section 500 shall be
given by the company to the Registrar within ten days of the passing thereof. 454If default is
made in complying with it the company, and every officer of the company who is in default,
shall be punishable with fine which may extend to [five hundred] rupees for every day during
which the default continues455
On the appointment of a liquidator, all the powers of the Board of directors shall cease,
except insofar as the committee of inspection, or if there is no such committee, the creditors
in general meeting, may sanction the continuance thereof.456
Section.508. of Companies Act 1956 reads as follows- DUTY OF LIQUIDATOR TO
CALL MEETINGS OF COMPANY AND OF CREDITORS AT END OF EACH
YEAR (1) In the event of the winding up continuing for more than one year, the liquidator
shall - (a) call a general meeting of the company and a meeting of the creditors at the end of
the first year from the commencement of the winding up and at the end of each succeeding
year, or as soon thereafter as may be convenient within three months from the end of the year
or such longer period as the Central Government may allow ; and (b) lay before the meetings
an account of his acts and dealings and of the conduct of the winding up during the preceding
year, together with a statement in the prescribed form and containing the prescribed
particulars with respect to the proceedings in, and position of, the winding up. (2) If the
454
455
456
177
liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each
failure, with fine which may extend to [one thousand] rupees.457
Steps taken by the liquidator when the affairs of the company are fully wound up
Section 509. of the Companies Act 1956 reads as follows- FINAL MEETING AND
DISSOLUTION
―(1) As soon as the affairs of the company are fully wound up, the liquidator shall - (a) make
up an account of the winding up, showing how the winding up has been conducted and the
property of the company has been disposed of; (b) call a general meeting of the company and
a meeting of the creditors for the purpose of laying the account before the meetings and
giving any explanation thereof.
(2) Each such meeting shall be called by advertisement - (a) specifying the time, place and
object thereof ; and (b) published not less than one month before the meeting in the Official
Gazette and also in some newspaper circulating in the district where the registered office of
the company is situate.
(3) Within one week after the date of the meetings, or if the meetings are not held on the
same date, after the date of the later meeting, the liquidator shall send to the Registrar and the
Official Liquidator [referred to in clause (c) of subsection (1) of section 448] a copy each of
the account and shall make a return to each of them of the holding of the meetings and of the
date or dates on which they were held. If the copy is not so sent or the return is not so made,
the liquidator shall be punishable with fine which may extend to [five hundred] rupees for
every day during which the default continues.
(4) If a quorum (which for the purposes of this section shall be two persons) is not present at
either of such meetings, the liquidator shall, in lieu of the return referred to in sub-section (3),
make a return that the meeting was duly called and that no quorum was present thereat. Upon
such a return being made within one week after the date fixed for the meeting, the provisions
of sub-section (3) as to the making of the return shall, in respect of that meeting, be deemed
to have been complied with.
457
Section.508. of Companies Act 1956
178
(5) The Registrar, on receiving the account and also, in respect of each such meeting, either
the return mentioned in sub-section (3) or the return mentioned in sub-section (4), shall
forthwith register them.
(6) The Official Liquidator [referred to in clause (c) of sub-section (1) of section 448] on
receiving the account and either the return mentioned in sub-section (3) or the return
mentioned in sub-section (4), shall, as soon as may be, make, and the liquidator and all
officers, past or present, of the company shall give the Official Liquidator [referred to in
clause (c) of sub-section (1) of section 448] all reasonable facilities to make, a scrutiny of the
books and papers of the company and if on such scrutiny the Official Liquidator [referred to
in clause (c) of sub-section (1) of section 448] makes a report to the [Tribunal] that the affairs
of the company have not been conducted in a manner prejudicial to the interests of its
members or to public interest, then, from the date of the submission of the report to the
[Tribunal] the company shall be deemed to be dissolved.
(6A) If on such scrutiny the Official Liquidator [referred to in clause (c) of sub-section (1)
of section 448] makes a report to the [Tribunal] that the affairs of the company have been
conducted in a manner prejudicial as aforesaid, the [Tribunal] shall by order direct the
Official Liquidator [referred to in clause (c) of sub-section (1) of section 448] to make a
further investigation of the affairs of the company and for that purpose shall invest him with
all such powers as the [Tribunal] may deem fit.
(6B) On the receipt of the report of the Official Liquidator [referred to in clause (c) of sub-
section (1) of section 448] on such further investigation the [Tribunal] may either make an
order that the company shall stand dissolved with effect from the date to be specified by the
[Tribunal] therein or make such other order as the circumstances of the case brought out in
the report permit.
(7) If the liquidator fails to call a general meeting of the company or a meeting of the
creditors as required by this section, he shall be punishable, in respect of each such failure,
with fine which may extend to [five thousand] rupees.‖458
458
Section 509. of the Companies Act
179
WINDING UP LEGAL POSITION UNDER COMPANIES ACT, 2013 VIS-À-VIS
INSOLVENCY AND BANKRUPTCY CODE, 2016
Prior to November 15, 2016, the term ―winding up‖ was neither defined under the Companies
Act, (―1956 Act‖) nor under the Companies Act, (―2013 Act‖).Section 255 of the Insolvency
and Bankruptcy Code, 2016 has been notified and came into force from November 15, 2016
and because of Section 255, the 2013 Act stands amended in accordance with Schedule XI of
the Insolvency and Bankruptcy Code. The abovementioned Schedule XI now defines the
term ―winding up‖ by adding a new Section 2(94A) to the 2013 Act as ―winding up under
this Act or liquidation under the Insolvency and Bankruptcy Code, 2016.‖ On a close perusal
of the definition, it would be safe to deduce that winding up procedures will now be governed
by the arrangements of 2013 Act and the Code. The other critical changes brought about by
the Code within the 2013 Act incorporates expulsion of arrangements of ‗voluntary winding
up‘ and winding up on the ground of ‗inability to pay the standing obligations i.e. debt‘ from
the 2013 Act as the procedures identifying with these now have been put under the Code.
Following the notification of Section 255 of the Code, the Ministry of Corporate Affairs
(“MCA”), by its Notification dated December 07, 2016, has notified the provisions of
Chapter XX of the 2013 Act with effect from December 15, 2016. These provisions
relate to winding up of companies on any ground other than inability to pay debts i.e.
on any of the circumstances mentioned under Section 271(a) to (e) of the 2013 Act (as
discussed hereunder). I would like to now outline the current legal position for various
methods of winding up of a company as per the notifications relating to requirement of
enforcement of Section 255 of the Code and Chapter XX of the 2013 Act, dated November
15, 2016 and December 07, 2016,respectively.
POSITION PRIOR TO NOVEMBER 15, 2016
The arrangements for winding up given in Chapter XX of the 2013 Act divided into four
parts:
• Part I managing the arrangements for winding up by the National Company Law
(―Tribunal‖);
• Part II (Sections 304-323) managing the arrangements for voluntary winding up;
180
• Part III managing arrangements pertinent to each method of winding up; and
• Part IV managing appointment of official liquidator.
The above mentioned arrangements, in spite of the fact that they were given in the 2013 Act,
were never notified. Consequently, preceding November 15, 2016, winding up through any
mode, i.e. voluntary winding up and winding up by Tribunal, was governed by the
arrangements of 1956 Act.
POSITION AFTER NOVEMBER 15, 2016
Winding up on inability to pay debts
Section 271(1)(a) of 2013 Act which dealt with the winding up by Tribunal on account of
inability to pay debts has been omitted by Section 255 of the Code. The same is now dealt
with in accordance with the provisions of Sections 7 to 9 of the Code, being initiation of
corporate insolvency resolution process by financial and operational creditors.
The scheme of the Code is to ensure that when a default takes place, in the sense that a debt
becomes due and is not paid, the insolvency resolution process begins. Default is defined
in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due
and payable, which includes non-payment of even part thereof or an instalment amount. For
the meaning of ―debt‖, we have to go to Section 3(11), which in turn tells us that a debt
means a liability of obligation in respect of a ―claim‖ and for the meaning of ―claim‖, we
have to go back to Section 3(6) which defines ―claim‖ to mean a right to payment even if it is
disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section
4.) The corporate insolvency resolution process may be triggered by the corporate debtor
itself or a financial creditor or operational creditor. A distinction is made by the
Code between debts owed to financial creditors and operational creditors. A financial creditor
has been defined under Section 5(7) as a person to whom a financial debt is owed and a
financial debt is defined in Section 5(8) to mean a debt which is disbursed against
consideration for the time value of money. As opposed to this, an operational creditor means
a person to whom an operational debt is owed and an operational debt under Section 5 (21)
means a claim in respect of provision of goods or services.
When it comes to a financial creditor triggering the process, Section 7 becomes relevant.
Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any
181
financial creditor of the corporate debtor – it need not be a debt owed to the applicant
financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in
such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made
by a financial creditor in Form 1 accompanied by documents and records required therein.
Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I,
particulars of the corporate debtor in Part II, particulars of the proposed interim resolution
professional in part III, particulars of the financial debt in part IV and documents, records and
evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the
application filed with the adjudicating authority by registered post or speed post to the
registered office of the corporate debtor.
The speed, with which the adjudicating authority is to find out the presence of a default from
the records of the information utility or on the premise of confirmation outfitted by the
financial creditor, is imperative. This it must do within a time span of 14 days of the receipt
of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be
satisfied that a default has happened, that the corporate debtor is qualified for bring up that a
default has not happened as in the ―debt‖, which may likewise incorporate a claim which is
disputed, is not due. A debt may not be due in the event that, it is not payable in law or in fact
The minute the adjudicating authority is satisfied that a default has happened, the application
must be admitted until and unless it is incomplete, and in such a case it might give notice to
the applicant to set right the defect within a time span of 7 days of receipt of a notice from the
adjudicating authority. This would mean that, now under the Insolvency and Bankruptcy
Code,2016, insolvency resolution proceedings can be started even against a ‗financially
solvent company‘ which has made a default in payment of its debts which has become due, as
now the same would fall within the domain of ―default‖ under the Code.
Under sub-section (7), the adjudicating authority shall then convey the order passed to the
financial creditor and corporate debtor within a time span of seven days of admission or
rejection of such application, as the case may be.
The scheme of Section 7 is totally different from the scheme under Section 8 where an
operational creditor has to, on the happening of a default, to first deliver a demand notice of
the unpaid debt to the operational debtor in such manner as provided in Section 8(1) of the
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Code. Under Section 8(2), the corporate debtor can, within a time span of 10 days of receipt
of the demand notice or copy of the receipt said in sub-section (1), convey to the notice of the
operational creditor the presence of a dispute or the record of the pendency of a suit or
arbitration procedures, which is preexisting i.e. before such notice or invoice was received by
the corporate debtor. The moment there is existence of such a dispute, the operational creditor
gets out of the clutches of the Code.
On the other hand, as we have seen, in the case of a corporate debtor who commits a default
of a financial debt, the adjudicating authority has merely to see the records of the information
utility or other evidence put forward by the financial creditor for its satisfaction that a default
has occurred. It is regardless of the fact that the debt is disputed so long as the debt is ―due‖
i.e. payable unless prohibited by some law or has not yet become due in the sense that it is
payable at some future date. It is only when this is proved to the satisfaction of the
adjudicating authority that the adjudicating authority may reject an application and not
otherwise.
The rest of the insolvency resolution process is also very important. The entire process is to
be completed within a period of 180 days from the date of admission of the application
under Section 12 and can only be extended beyond 180 days for a further period of not
exceeding 90 days if the committee of creditors by a voting of 75% of voting shares so
decides. It can be seen that time is of essence in seeing whether the corporate body can be put
back on its feet, so as to stave off liquidation.
As soon as the application is admitted, a moratorium in terms of Section 14 of the Code is to

be declared by the adjudicating authority and a public announcement is made stating, inter
alia, the last date for submission of claims and the details of the interim resolution
professional who shall be vested with the management of the corporate debtor and be
responsible for receiving claims. Under Section 17, the erstwhile management of the
corporate debtor is vested in an interim resolution professional who is a trained person
registered under Chapter IV of the Code. This interim resolution professional is now to
manage the operations of the corporate debtor as a going concern under the directions of a
committee of creditors appointed under Section 21 of the Act. Decisions by this committee
are to be taken by a vote of not less than 75% of the voting share of the financial creditors.
Under Section 28, a resolution professional, who is none other than an interim resolution
professional who is appointed to carry out the resolution process, is then given wide powers
183
to raise finances, create security interests, etc. subject to prior approval of the committee of
creditors.
Under Section 30, any person who is interested in putting the corporate body back on its feet
may submit a resolution plan to the resolution professional, which is prepared on the basis of
an information memorandum. This plan must provide for payment of insolvency resolution
process costs, management of the affairs of the corporate debtor after approval of the plan,
and implementation and supervision of the plan. It is only when such plan is approved by a
vote of not less than 75% of the voting share of the financial creditors and the adjudicating
authority is satisfied that the plan, as approved, meets the statutory requirements mentioned
in Section 30, that it ultimately approves such plan, which is then binding on the corporate
debtor as well as its employees, members, creditors, guarantors and other stakeholders.
Importantly, and this is a major departure from previous legislation on the subject, the minute
the adjudicating authority approves the resolution plan, the moratorium order passed by the
authority under Section 14 shall cease to have effect. The scheme of the Code, therefore, is to
make an attempt, by divesting the erstwhile management of its powers and vesting it in a
professional agency, to continue the business of the corporate body as a going concern until a
resolution plan is drawn up, in which event the management is handed over under the plan so
that the corporate body is able to pay back its debts and get back on its feet.
All this is to be done within a period of 6 months with a maximum extension of another 90
days or else the chopper comes down and the liquidation process begins. So we can say that,
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 application by the Tribunal, on failure of which, Tribunal
may pass an order for liquidation of the corporate person in relation to whom the application
was made. Under the erstwhile regime, 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,459 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. Thus, a
solution to initiate winding up proceedings against financially solvent companies that had
459
142 Comp .Cas170 (AP)
184
made a default in payment of debts was not available under the earlier regime.‖ However, in
any case this is now feasible under the Code.
Winding up on grounds other than inability to meet the standing obligations i.e. debt
The circumstances under which a company can be wound up by Tribunal have been clearly
enlisted in Section 271of the companies Act,2013 as follows : (a) special resolution being
passed to that effect; (b) acting against the sovereignty and integrity of India, security of
state, friendly relations with foreign states, public order, decency or morality; (c) conducting
affairs in a fraudulent manner; (d) default in filing of financial statements or annual returns
with the Registrar for immediately preceding five financial years; and (e) on just and
equitable grounds in the opinion of Tribunal.460 The above sub-section (d) identifying with
winding up on non- of monetary proclamations and yearly returns of going before five years
has been presented in the 2013 Act and was not given in the 1956 Act. Prior to this the cure
available with the Registrar for non-filing of financial statement and yearly return by a
company was to pronounce such organization as a defunct company and strike off the name
of such company from the register of companies. Now, the same has also been introduced in
the 2013 Act as a ground for winding up. The abovementioned provisions stand notified with
effect from December 15, 2016, thus the winding up applications on any of the reasons
mentioned above would be made to the Tribunal according to the provisions of 2013 Act.
 Voluntary winding up461
The arrangements of voluntary winding up as given under the 2013 Act directly stands
omitted because of the notification of Section 255 of the Code. In any case, these
arrangements now fall inside the domain of Section 59 of the Code which manages the
voluntary winding up of corporate people. This Section is yet to be notified. Along these
lines, in perspective of non notification of the arrangements of voluntary winding up under
the Code, the question which emerges is in regards to arrangements which will be applicable
for voluntary winding up of organizations and the way in which a similar will be managed.
In response to the above query the solution can be derived from Section 468(3) of the 2013
Act which furnishes that as for winding up, any principles confined by the Hon‘ble Supreme
Court at any time before the commencement of 2013 Act shall continue to be in force till the
460
271 of Companies Act 2013
461 th
Position before 30 march 2017
185
time new rules are framed to that effect by the Central Government and any reference to the
High Court in those rules shall be construed as the reference to the Tribunal. The Tribunal
might not have the authority to take up applications relating to voluntary winding up till the
notification of voluntary winding up under the Code. In this manner, till the time such
arrangements are notified and relating Rules are recommended by the Central Government,
the strategy set down under the Companies (Court) Rules, 1959 (―Court Rules‖), i.e. the rules
which are formulated by the Apex Court, would be applicable and subsequently to the extent
Court Rules refer to the provisions of 1956 Act, such provisions would be applicable to the
applications of voluntary winding up. Thus, as on date, all the applications or petitions
relating to the ‗voluntary winding up‘ shall continue to be made to the High Court of
competent jurisdiction.
Winding up proceedings to be transferred from High Court to Tribunal
Along with the Notification dated December 07, 2016, MCA on the same date issued the
Companies (Transfer of Pending Proceedings) Rules, 2016 (―Rules‖) for clarifying the
ambiguities relating to transfer of pending proceedings from a High Court to the Tribunal.
The same can be outlined in the following way:
Winding up proceedings pending before High Court on ground of inability to pay debts
Each and every proceedings pending before the steady gaze of the High Courts on December
15, 2016, and the notice of which have not been served on the respondent, would be
transferred to the respective Bench of the Tribunal practicing regional jurisdiction over the
concerned State and shall be managed in according to the courses of action of the Code.
Winding up procedures pending before the watchful eye of High Court on grounds other
than inability to pay the standing obligations i.e. debts
All of the procedures pending under the watchful eye of the High Courts on December 15,
2016 and the notice of which have not been served on the respondent, shall be transferred to
the respective seat of the Tribunal practicing regional jurisdiction over the concerned State
and should be managed as per the arrangements of 2013 Act.
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Winding up proceedings pending before watchful eye of the High Court relating to
voluntary winding up
All of the procedures pending under the steady gaze of the High Courts till April 1, 2017,
should keep on being managed by the High Courts as per the arrangements of 1956 Act.
The Hon‘ble Bombay High Court, in the case of West Hills Realty Private Ltd. and Ors v.
Neelkamal Realtors Tower Private Limited462, has further clarified that only the petitions
which are at a pre-admission stage and have not been served on the respondent will be
transferred to the Tribunal. Petitions, for which only the notice of hearing of the petition
before the Court has not been served, will not be transferred to the Tribunal.
In this way, such petitions will keep on being managed by the High Courts. In light of the
previously mentioned, it can be inferred that pending proceedings for both winding up on
failure to pay debt and winding up on grounds other than inability to pay the standing
obligations will be transferred to Tribunal. In spite of the fact that the previous class will be
administered by the arrangements of the Code, the later classification will be represented by
the arrangements of 2013 Act. Pending techniques for voluntary winding up will continue
being overseen by the High Courts according to the courses of action of 1956 Act and the
system embraced under the Court Rules.
The new application for beginning of corporate insolvency determination process on grounds
of ―default‖ under the Code may be made before the Tribunal according to the technique
prescribed under the ―Insolvency and Bankruptcy Board of India (Insolvency Resolution
Process for Corporate Persons) Regulations, 2016,‖ advised with effect from December 01,
2016. In relation to this, the present position with respect to particular strategies for winding
up ,there is a likelihood that transfer of winding up applications, on account of inability to
pay debts made to the High Courts previously December 15, 2016 and transferred to the
Tribunal, under the Code can be an extra tedious procedure as no company can be directly
wound up under the Insolvency and Bankruptcy Code, i.e. each procedure needs to undergo
the corporate bankruptcy determination process and resulting liquidation on failure of
insolvency determination process.
While, MCA seems to be in a hurry to shift the burden of corporate litigation from High
Courts to the Tribunal, the same is not without hurdles.
462
MANU/MH/2758/2016 decided on December 26,2016
187
Another worry is the overburdening of the Tribunal because of existing suits under 2013 Act,
transfer of pending cases from the prior forums, for example, Company Law Board and the
Board for Industrial and Financial Reconstruction. In like manner, in context of the above, it
will be intriguing to see how the Tribunal manages new applications under the 2013 Act and
the Code, pending cases transferred from High Courts, Company Law Board and Board for
Industrial and Financial Reconstruction.
LATEST DEVELOPMENT IN VOLUNTARY WINDING UP
The Insolvency and Bankruptcy Code, 2016 (the Code) has consolidated the insolvency,
bankruptcy and liquidation laws for companies, partnerships firms, limited liabilities
partnerships and individuals in India, which came into effect on 28 May 2016.
With an aim to consolidate the law related to insolvency and bankruptcy, the Code seeks to
shift the winding up process by creditors and voluntary winding up by members from the
ambit of the Companies Act, 2013 to the Code.
In pursuance of that, on 30 March 2017, the Ministry of Corporate Affairs (MCA) notified
Section 59 of the Code pertaining to voluntary winding up of a corporate person (companies
and limited liability partnership) under the Code. Furthermore, the IBBI vide its notification
dated 31 March 2017 issued the IBBI (Voluntary Liquidation) Regulations, 2017. The
regulations provide the process from initiation of voluntary liquidation of corporate person
till its dissolution. The key features of the same are:
A corporate individual who has not conferred any default can start the voluntary liquidation
process. The winding up process should begin on the date on which a special resolution is
passed by the individuals/members of the corporate entity to liquidate the corporate person
and appoint an Insolvency Professional (IP) to act as the liquidator. On the appointment of a
liquidator, the corporate person shall cease to carry on its business.
For initiating voluntary liquidation, the majority of Directors and Designated Partners of the
corporate person have to make a declaration to the effect that:
The corporate person has no debts or it will be able to pay its debts in full from the proceeds
of the assets to be sold in the voluntary liquidation; and
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The corporate person is not being liquidated to defraud any person.
It provides the eligibility criteria for appointing an IP as a liquidator.
It specifies and provides for:
The manner and content of the public announcement of the appointment of a liquidator.
Invitation of claims from the stakeholders.
Receipt and verification of claims.
Various reports and registers to be made and preserved by the liquidator.
Realisation and distribution of the assets of the corporate person.
It also provides for the manner and procedure for dealing with extortionate credit
transactions, unclaimed proceeds of liquidation/undistributed assets, detection of fraud, etc.
The liquidator is obliged to safeguard a physical/electronic duplicate of the reports, registers
and books of accounts for no less than eight years after the disintegration of the corporate
entity, either with him or with an information utility.
In the event that the corporate individual can‘t pay its debt in full from the returns of the
assets sold in liquidation, the liquidator needs to make an application to the National
Company Law Tribunal (NCLT) to suspend the process of liquidation and pass any order as
he deems fit.
On the completion of the liquidation process, the liquidator shall prepare and submit the final
report to the NCLT and after the affairs of the corporate person are wound up, he will make
an application to NCLT for dissolution of the corporate person.
With the above notification, winding up the proceedings of solvent companies are omitted
from the Companies Act, 2013 and are now governed by the Code. The forum to deal with
the process will be the respective NCLT Benches from now on instead of the High Court.
Winding up of insolvent companies is already being governed by the provisions of the Code.
The IP who acts as the liquidator for the process of voluntary winding up assumes a key role
in the process since the Code has given the authority to the liquidator for completely driving
the process of winding up.
Hence, the efficiency of the winding up process would be largely dependent upon the person
who is appointed as the liquidator of the company.
Earlier, starting a business in India was easier, but their closure was a cumbersome and time-
consuming process. The issue of voluntary winding up regulations is a step forward for easy
closure of solvent businesses in India. The regulation aims at speedy winding up and
protecting/balancing the interest of all the stakeholders of the company.
189
THE LIQUIDATION PROCESS AFTER COMING INTO FORCE THE IBC, 2016
The recently introduced legal, regulatory and policy changes that have been introduced in the
Indian BFSI463 sector have not only geared up the pace at which the sector is operating but
has also created a change in the overall dynamics. On 31st December 2016, gross Non
Performing Assets (NPA) in the Indian Banking Sector stood at approximately 9.3 % of total
advances1. This has adversely affected the economy at large leading to blockage in huge
amounts of capital, which could be deployed for other productive purposes, thereby derailing
the spirit of entrepreneurship in the country. To battle with this circumstance, the RBI has
been making a few strides and activities in the previous couple of years, for example, Joint
Lender Forum, Strategic Debt Restructuring and Scheme for Sustainable Structuring of
Stressed Assets (S4A) to give some examples that have intended to handle the quantum of
terrible loans. With the inclusion of these activities, the Insolvency and Bankruptcy Code
2016 (IBC) upholds a thorough administration that offers a feasible option for determination
of different issues and strike an ideal harmony between the debtors‘ interest and concern of
stakeholders.
The Liquidation Process
On 15th December 2016, the Central Government notified the rules by which companies can
go through liquidation under the Insolvency and Bankruptcy Code 2016. These Regulations
provide details of procedures to be reckoned to start with issue of liquidation order under
Section 33 of the Code till dissolution order under Section 54 (i.e. Chapter III of Part II of
IBC). The regulations governing liquidation offer a comprehensive strategy to implement the
process of liquidation. The rules require the liquidator to prepare and submit a preliminary
report, asset memorandum, sale report, progress report and final report prior to initiating the
liquidation process with the National Company Law Tribunal (NCLT).
The New Role of a Liquidator
Liquidator is the Insolvency Professional who endeavours to assess and realise the assets of
the company to facilitate the procedure of liquidation. Despite the fact that, the
power/functions of the liquidator seem similar to the functions of the liquidator under
Companies Act 1956, there is a component of dynamism included backed by independence in
463
Banking, Financial services and Insurance
190
execution of responsibilities. Even though the new regulations have eased the regulatory
compliances, there are a few challenges that are yet to be tackled and addressed to, when it
comes to a seamless execution of the said processes. The fee payable to liquidator shall form
a part of the liquidation cost. This incentive to liquidator, to liquidate the asset in an efficient/
time bound manner, maximizes the return to the stakeholders. Although these incentives aim
at obtaining quick and efficient resolution, there are liability provisions as well for liquidators
(for contravening the provisions of the code). Liability provisions for the insolvency experts
are discussed in detail below.
Liability Provisions of Liquidation
In the event that an outlet repudiates the arrangements of the IBC, the Adjudicating
Authority may rebuff him with detainment or force a fine or both. The Insolvency and
Bankruptcy Board of India (“Board”) likewise has the ability to force punishment as
well as suspend/scratch off the enlistment of the vendor as indebtedness proficient, after
consummation of the disciplinary procedures, which could be started either on a
bearing by the Adjudicating Authority endless supply of a dissension by any oppressed
individual or by the Board itself. The applicable arrangements are clarified beneath:
Strict liability provisions are provided by the IBC, 2016, for the insolvency professionals,
including the liquidator. In the event when a liquidator violates the provisions of the IBC, the
Adjudicating Authority may punish him with detention or impose a fine or both. The
―Insolvency and Bankruptcy Board of India‖ similarly has the power to inflict punishment
and in addition to this can suspend or cancel the registration of the liquidator as ‗insolvency
professional‘, after carrying out the disciplinary proceedings, that could be initiated either on
a direction by the Adjudicating Authority or upon receipt of a complaint by any aggrieved
individual or by the Board itself. The applicable provisions are clarified below:
1. By the Adjudicating Authority:
a. Under Section 70(2), it is provided that any bankruptcy professional who

intentionally negates the arrangements of the corporate insolvency resolution process
(Part II of IBC), might be punished with imprisonment for a terms which may extend
to a half year, or with least fine of one lakh rupees, which may stretch out to five
lakhs rupees or with both;
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b. On an application made under Section 47(1) if the Adjudicating Authority is satisfied
of IBC by any creditor about any undervalued transaction, which has not reported to
the Adjudicating Authority by the liquidator, regardless of having sufficient
information or opportunity, it may direct the Board under Section 47(2) to start a
disciplinary proceedings against such liquidator.
2. By the Board:
The Board may:
A. ‗Upon direction of the Adjudicating Authority‘ under Section 47(2);

B. ‗Upon the receipt of complaint under Section 217(1) from any individual aggrieved
by the functioning of an insolvency professiona‘l;
C. Under Section 218(1), ‗if the Board has reasonable ground to trust that an insolvency
professional has repudiated any provisions of the IBC or rules or regulations made or
directions issued by the Board; direct any person or persons to act as investigating
agency to conduct an inspection or investigation of the insolvency professional or
insolvency professional agency or information utility‘. On completion of inspection or
investigation, the Board under Section 219 ‗may issue show cause notice to the
insolvency professional or insolvency professional agency or information utility‘ and
under Section 220 (1) ‗may appoint a disciplinary committee to consider the reports
of the investigating
authority. (The Rule 11(1) to(7) of the Insolvency and Bankruptcy Board of India (Ins
olvency Professionals) Regulations, 2016,framed under powers conferred by Section
196, 207, 208 read with Section 240 of the IBC, contain the procedure and
timelines for issuance and disposal of show cause notice).
Under Section 220(2), ‗if the disciplinary committee is satisfied that sufficient cause exists
upon examination of report of the investigating authority, it may impose penalty as specified
in sub-section(3) Or suspend or cancel the registration of the insolvency professional or
insolvency professional agency or information utility. Under sub-section (3), upon
contravention of any provisions of IBC or rules or regulations made there under, the
disciplinary committee may impose penalty which is three times the amount of the loss
caused, or likely to have been caused, to persons concerned or three times the amount of
unlawful gain made on account of any contravention, whichever is higher and in case the loss
192
or unlawful gain is not quantifiable, the total amount of penalty imposed shall not exceed
more than one crore rupees‘.
It is evident that the role of liquidator is going to be both crucial and at the same time
gratifying. He has to strike the finest balance with respect to interest of all the stakeholders in
an unbiased way. On the whole we can say that, the Insolvency and Bankruptcy Code is a
right move in the direction of solving the problem of NPAs. It is expected that
implementation of the code and liquidation provisions can potentially unlock capital to the
tune of Rs 25,000 Crores, blocked in form of NPA over next few years. This will encourage
entrepreneurship by releasing the blocked capital, strengthen the bond market and strengthen
creditor‘s right.
193
STATEMENT OF AFFAIRS; TAKING POSSESSION AND INVENTORY OF
ASSETS
STATEMENT OF AFFAIRS
1. After the winding up order is issued by Company Court, the directors of company
have to submit to liquidator a statement of affairs of the company, stating particulars
of the following:
a. ―Debts and liabilities of the company
b. Assets of the company, showing separately cash in hand and in bank and
negotiable securities.
c. Names, residences and occupations of its creditors stating separately amount of
secured and unsecured debts, particulars of securities given of secured debts and
value and date when the security was given.
d. Debts due to the company and the names, residences and occupations of the
persons from whom they are due and amount likely to be realized.
e. Such further information as may be prescribed, or as may be required by official
liquidator.[sec.454(1)]
2. The statement shall be submitted and verified by one or more of the persons who are
at the relevant date the director and by the person who is at that date the manager,
security or other officer of the company, or by the persons mentioned below, as the
official liquidator may require below mentioned official to submit and verify the
statement ,that is to say:
a) The person who are or have been the officials of the company.
b) Promoters of the company ,i.e. persons who conceived the idea of forming the
company and incorporated the same at any time within one year before the
relevant date,
c) Who are in the employment of the company, or have been within the employment
of the company within the said year;
d) Who are or have been within the said year officers of, or in the employment of a
company which is or within the said year was, an officer of the company to which
the statement relates.
194
3. The statement shall be submitted within twenty one days from the relevant date, or
within such extended time not exceeding three months from that date as the official
liquidator or the court may for special reasons appoint.
4. Any person making or concurring in making the statement and affidavit required by
this section shall be allowed and shall be paid by the official liquidator or provisional
liquidator as the case may be, out of the assets of the company, such costs and
expenses incurred in the preparation of the statement and affidavit.
5. Non-submission of required statement is punishable with imprisonment of up to two
years and fine up to Rs. 1000 per day till the default continues.
6. If any person stating himself in writing to be a creditor or contributory of the
company shall be entitled, by himself or his agent, at all times, may have access to
statement of affair as submitted under this section on payment of the fees so
prescribed, , and also to have a copy thereof.‖464
It may be noted that by virtue of section 511A, the provisions of the section454, so far as
possible, shall apply to the voluntary winding up of the company, as they apply to the
compulsory winding up. Thus all the powers vested in the Court and official liquidator
u/s.454 in a compulsory winding up, become vested in the liquidator in the voluntary
winding up.
NOTE: Wrong statement is also punishable as per provisions of Indian Penal Code.
Report by Official Liquidator
Section 455. of Companies Act 1956 reads as follows-REPORT BY OFFICIAL

LIQUIDATOR
―(1) In a case where a winding up order is made, the Official Liquidator shall, as soon as
practicable after receipt of the statement to be submitted under section 454 and not later
than six months from the date of the order or such extended period as may be allowed by
the [Tribunal], or in a case where the [Tribunal] orders that no statement need be
submitted, as soon as practicable after the date of the order, submit a preliminary report to
the [Tribunal] - (a) as to the amount of capital issued, subscribed, and paid-up, and the
estimated amount of assets and liabilities, giving separately, under the heading of assets,
464
195
particulars of (i) cash and negotiable securities ; (ii) debts due from contributories ; (iii)
debts due to the company and securities, if any, available in respect thereof ; (iv) movable
and immovable properties belonging to the company ; and (v) unpaid calls ; (b) if the
company has failed, as to the causes of the failure ; and (c) whether, in his opinion, further
inquiry is desirable as to any matter relating to the promotion, formation, or failure of the
company, or the conduct of the business thereof. (2) The Official Liquidator may also, if
he thinks fit, make a further report, or further reports, stating the manner in which the
company was promoted or formed and whether in his opinion any fraud has been
committed by any person in its promotion or formation, or by any officer of the company
in relation to the company since the formation thereof, and any other matters which, in his
opinion, it is desirable to bring to the notice of the [Tribunal]. (3) If the Official Liquidator
states in any such further report that in his opinion a fraud has been committed as
aforesaid, the [Tribunal] shall have the further powers provided in section 478.‖465
Custodian of company’s property466
Section 456.of Companies Act 1956 reads as follows- CUSTODY OF COMPANY'S

PROPERTY
(1) Where a winding up order has been made or where a provisional liquidator has been
appointed, the liquidator or the provisional liquidator, as the case may be, shall take into
his custody or under his control, all the property, effects and actionable claims to which
the company is or appears to be entitled (1A) For the purpose of enabling the liquidator or
the provisional liquidator, as the case may be, to take into his custody or under his control,
any property, effects or actionable claims to which the company is or appears to be
entitled, the liquidator or the provisional liquidator, as the case may be, may by writing
request the Chief Presidency Magistrate or the District Magistrate within whose
jurisdiction such property, effects or actionable claims or any books of account or other
documents of the company may be found, to take possession thereof, and the Chief
Presidency Magistrate or the District Magistrate may thereupon after such notice as he
may think fit to give to any party, take possession of such property, effects, actionable
claims, books of account or other documents and deliver possession thereof to the
465
Sec. 455. Of Companies Act 1956
466
Section 456.of Companies Act 1956
196
liquidator or the provisional liquidator. (1B) For the purpose of securing compliance with
the provisions of sub-section (1A), the Chief Presidency Magistrate or the District
Magistrate may take or cause to be taken such steps and use or cause to be used such force
as may in his opinion be necessary. (2) All the property and effects of the company shall
be deemed to be in the custody of the [Tribunal] as from the date of the order for the
winding up of the company
Sec.283. Custody of company’s properties467
―(1) Where a winding up order has been made or where a provisional liquidator has been
appointed, the Company Liquidator or the provisional liquidator, as the case may be, shall, on
the order of the Tribunal, forthwith take into his or its custody or control all the property,
effects and actionable claims to which the company is or appears to be allowed to and take
such steps and process, as may be essential, to protect and safeguard the properties of the
company.
(2) Notwithstanding anything contained in sub-section (1), all the property and effects of the
company shall be deemed to be in the custody of the Tribunal from the date of the order for
the winding up of the company.
(3) On an application by the Company Liquidator or otherwise, the Tribunal may, at any time
after the making of a winding up order, require any contributory for the time being on the list
of contributories, and any trustee, receiver, banker, agent, officer or other employee of the
company, to pay, deliver, surrender or transfer forthwith, or within such time as the
Tribunal directs, to the Company Liquidator, any money, property or books and papers in his
custody or under his control to which the company is or appears to be entitled.‖
MAINTENANCE OF ACCOUNTS AND AUDIT
The proper maintenance of accounts and its audit hold a key importance at the time of
winding up as all the stake holders including creditors have to be allocated their dues. Its
importance are further highlighted by the fact that books of account are deemed as a prima
facie evidence of the matters contained therein and thus it is very valuable for transparency.
467
Sec283 of Companies Act,2013 The equivalent provision to Sec.456 of companies Act 1956, was notified by
the MCA, dated 7dec,2016(w.e.f. 15 Dec,2016)
197
Given its salience statutory rights has been created which vests in the creditors and
Contributories with respect to the books of account.468
The provisions in the Companies Act, relating to accounts and audit during the winding
up process:
Section 548. of Companies Act,1956 reads as follows-BOOKS AND PAPERS OF

COMPANY TO BE EVIDENCE
Where a company is being wound up, all books and papers of the company and of the
liquidators shall, as between the contributories of the company, be prima facie evidence of
469
the truth of all matters purporting to be therein recorded. The equivalent provision of
Section 548 of the Companies Act, 1956 in the Companies Act, 2013 is Sec.345 470 and there
is no material change in the provision.
In the case of Re,Great Northern Salt &Chemical works471 , it was held that the books and
papers are prima facie evidence of the matters contained therein, and the same may be
rebutted. Further, it was held in the case of Kesar Singh v.The Joint Official Liquidators of
Radhesham Beopar Co.Ltd472, that books and papers will be prima facie evidence only as
between the contributories but not as against any third persons, against whom they must be
proved in ordinary manner, according to the law of evidence. An entry in the book being
prima facie evidence, the burden is on the contributory, denying it to disprove the same by
positive evidence.
Section 549. of the Companies Act 1956 reads as follows- INSPECTION OF BOOKS
AND PAPERS BY CREDITORS AND CONTRIBUTORIES
(1) At any time after the making of an order for the winding up of a company by [the
Tribunal], any creditor or contributory of the company may, if the Supreme Court, by rules
prescribed so permit and in accordance with and subject to such rules but not further or
otherwise, inspect the books and papers of the company. (2) Nothing in sub-section (1) shall
be taken as excluding or restricting any rights conferred by any law for the time being in
468
Sec.548 of the companies Act,1956 and clause 320 of companies bill passed by the parliament in 2013.
Sec 345 of companies Act,2013 was notified by the MCA, dated 7dec,2016(w.e.f. 15 Dec,2016)
469
Section 548. of Companies Act
470
notified by the MCA, dated 7dec,2016(w.e.f. 15 Dec,2016)
471
(1890)44ChD472
472
AIR1937Lah61
198
force - (a) on the Central or a State Government ; or (b) on any authority or officer thereof ;
or (c) on any person acting under the authority of any such Government or of any such
authority or officer.473
The equivalent provision of Section 549 of the companies Act, 1956 in the Companies Act,
2013 is Sec.346474 and there is no material change in the provision. In the case of Re ,Kent
Coalfields Syndicate 475 ,it was held that once a winding up order is made, section 549
supersedes section 163 and 144 of the Companies Act, 1956. Even a person facing
misfeasance proceedings and in need of inspecting certain documents in the possession of
official liquidator, is entitled to inspection of such documents. However inspection can be
refused or postponed on the ground that the information obtained thereby will be used in
favour of directors who are to be publicly examined.
It was held in the case of London & Yorkshire bank v. Cooper, 476an order under this section
can be made, notwithstanding a secrecy clause in the articles. However, a secrecy clause will
stand good, if the winding up is only for the purpose of reconstruction.
Section 551.of Companies Act 1956 reads as follows- INFORMATION AS TO

PENDING LIQUIDATIONS
(1) If the winding up of a company is not concluded within one year after its
commencement, the liquidator shall, unless he is exempted from so doing
either wholly or in part by the Central Government, within two months of the
expiry of such year and thereafter until the winding up is concluded, at
intervals of not more than one year or at such shorter intervals, if any, as may
be prescribed, file a statement in the prescribed form and containing the
prescribed particulars duly audited, by a person qualified to act as auditor of
the company, with respect to the proceedings in, and position of, the
liquidation, - 1 [(a) in the case of a winding up by the Tribunal, in Tribunal ;
and] (b) in the case of a voluntary winding up, with the Registrar : Provided
473
Sec. 459 of Companies Act,1956
474
475
(1898)1QB754
476
(1885)15QBD473
199
that no such audit as is referred to in this sub-section shall be necessary where
the provisions of section 462 apply.477
Meaning of the phrase “within one year”
It was held in the case of State of Andhra Pradesh v. Taj Gass works Ltd.478, that the phrase
―within one year after the commencement‖ in this section can only mean ―within one year of
winding up order‖ when only liquidator can only be in a position to perform his duties under
section 551. It cannot mean the date of presentation of the winding up petition as in sec.441,
as an order for winding up may not be passed in many cases, within one year.
Irregular appointment of liquidator, the matter being challenged in court is no excuse

for non compliance with sec.551479
It was held in Government of India v. Shadi Lal Batra480 that the liquidator‘s being irregular
and challenged in court is no excuse for failure to comply with section 551. It was held in
Allan Ellis(Transport & packing) Services,Re481 that wherein a voluntary liquidator of three
companies failed to fulfil the requirements of section 551 and court orders were also
disobeyed, it was held that a sentence of three months imprisonment would be appropriate on
each motion and the same would run consecutively.
Official liquidator to make payments into the public accounts of India
Section 552. of Companies Act 1956 reads as follows- OFFICIAL LIQUIDATOR TO

MAKE PAYMENTS INTO THE PUBLIC ACCOUNT OF INDIA Every Official
Liquidator shall, in such manner and at such times as may be prescribed, pay the moneys
received by him as liquidator of any company, into the public account of India in the Reserve
482
Bank of India. The equivalent provision of Sec 552 of Companies Act, 1956, in the
Companies Act, 2013 is Sec.349483 and there is no material change in the provision.
477
Section 551.of Companies Act 1956
478
(1962)1 An WR39(AP)
479
Sec 348 of Companies Act,2013, notified by the MCA, dated 7dec,2016(w.e.f. 15 Dec,2016)
480
(1961)31Com Cases271
481
(1989)5BCC835
482
Section 552. of Companies Act 1956
483
200
Voluntary liquidator to make payments into Scheduled Bank.484
Section 553. of Companies Act 1956 reads as follows- VOLUNTARY LIQUIDATOR

TO MAKE PAYMENTS INTO SCHEDULED BANK ―(1) Every liquidator of a
company, not being an Official Liquidator, shall, in such manner and at such times as may be
prescribed, pay the moneys received by him in his capacity as such into a Scheduled Bank to
the credit of a special banking account opened by him in that behalf, and called Company
Limited "the Liquidation Account of..........................Company Private Limited": Company
Provided that if the [Tribunal] is satisfied that for the purpose of carrying on the business of
the company or of obtaining advances or for any other reason, it is to the advantage of the
creditors or contributories that the liquidator should have an account with any other bank, the
[Tribunal] may authorise the liquidator to make his payments into or out of such other bank
as the [Tribunal] may select; and thereupon those payments shall be made in the prescribed
manner and at the prescribed times into or out of such other bank.
(2) If any such liquidator at any time retains for more than ten days a sum exceeding five
hundred rupees or such other amount as the [Tribunal] may, on the application of the
liquidator, authorise him to retain, then, unless he explains the retention to the satisfaction of
the [Tribunal], he shall - (a) pay interest on the amount so retained in excess, at the rate of
twelve per cent per annum and also pay such penalty as may be determined by the Registrar ;
(b) be liable to pay any expenses occasioned by reason of his default; and (c) also be liable to
have all or such part of his remuneration as the [Tribunal] may think just disallowed, and to
be removed from his office by the [Tribunal].‖485
Section350. of Companies Act 2013 reads as follows- Company Liquidator to deposit

monies into scheduled bank486
This section states that―(1) Every Company Liquidator of a company shall, in such a way and
at such circumstances as may be provided, deposit the amount received by him in his capacity
as such in a scheduled bank to the credit of a special bank account opened by him in that
behalf:
484
Sec 553 of Companies Act 1956
485
Section 553 of Companies Act 1956
486
The equivalent provision of sec 553 of Companies Act, 1956, in the Companies Act, 2013 is Sec.350,with
some changes, notified by the MCA, dated 7dec,2016(w.e.f. 15 Dec,2016)
201
It is provided that if the Tribunal considers that it is profitable for the creditors or
contributories or the corporate body, it might allow the account to be opened in such other
bank determined by it.
(2) If any Company Liquidator whenever retains for more than ten days an amount exceeding
five thousand rupees or such other amount as the Tribunal may, on the application of the
Company Liquidator, authorise him to retain, then at that point, unless he explains the
retention to the satisfaction of the Tribunal, he shall—
(a) Pay interest on the amount so retained in excess, at the rate of twelve percent. Per annum
and also pay such penalty as may be determined by the Tribunal;
(b) Be liable to pay any expenses occasioned by reason of his default; and
(c) Also is liable to have all or such part of his remuneration, as the Tribunal may consider
just and legitimate, refused, or may likely to be expelled from his office.‖487
Keeping of bank accounts is an important and essential part of Liquidation process.
This was held in the case of Pabna Dhanbhandar Co.Ltd., Re488 that maintenance of bank
accounts is an integral part of carrying on liquidation.
It was held in Madras Provincial Co-operative Bank v. Official Liquidator, south Indian
Match Factory 489 that a bank dealing with cheques, which have been deposited by the
official liquidator, shall be deemed to have notice of the liquidator‘s duty under this section,
and if through negligence on the part of the bank any loss to the liquidation account results,
the bank will be liable to make good the amount.
Unpaid dividends and undistributed assets to be paid into Companies Liquidation

account490
“(1) Where any company is being wound up, if the liquidator has in his hands or under his
control any money representing-
Dividends payable to any creditor which had remained unpaid for six months after the date
on which they were declared, or
487
Section350. of Companies Act 2013
488
( 1936)6 Com Cases 422,425(Cal)
489
(1944)14 Com cases228 Mad.
490
202
Assets refundable to any contributory which have remained undistributed for six months after
the date on which they became refundable, the liquidator shall forthwith pay the money into
the public account of India in the Reserve Bank of India in a separate account to be known as
the Company‘s Liquidation Account.
(2) The liquidator shall, on the dissolution of the company, similarly pay into the said
account any money representing unpaid dividends or undistributed assets in his hands at the
date of dissolution.
(3) The liquidator shall, when making any payment referred to in subsections (1) and (2),
furnish to such officer as the Central Government may appoint in this behalf, a statement in
the prescribed form, setting forth, in respect of all sums included in such payment, the nature
of the sums, the names and the last known address of the persons entitled to participate
therein, the amount to which each is entitled and the nature of his claim there to, and such
other particulars as may be prescribed.
(4) The liquidator shall be entitled to a receipt from the Reserve Bank of India for any money
paid to it under subsection (1) and (2); and such receipt shall be an effectual release of the
liquidator in regard thereof.
(5) Where the Tribunal winds up the company, the liquidator shall make the payments as
provided in sub-section (1) and (2) by transfer from the account mentioned in section 552.
(6) Where the voluntary winding up of the company takes place Voluntarily or by the
company is being wound up by the tribunal, the liquidator shall, when filing a statement in
compliance of Subsection(1) of section 551, indicate the amount of money which is payable
to the Reserve Bank of India under subsection (1) and (2) of this section which he has had in
his hands or under his control during the six months preceding the date to which the said
statement is brought down, and shall, within 14 days of the date of filing the said statement,
pay that sum into the Companies Liquidation Account.491
(7) (a) Any individual asserting to be qualified for any cash paid into the Companies
Liquidation Account may apply to the tribunal for a request for payment thereof, and the
Tribunal, if fully satisfied that the individual claiming is entitled, may make aa order for the
payment to that individual of the sum which is due:
491
Supra n. 3
203
(b) Provided that before making such an order, the Tribunal shall cause the serving of a
notice on such officer as the central government may appoint on this behalf calling on the
officer to show cause within a period of one month from the date of the service of the notice
why the order should not be made.
(c) Any person claiming as aforesaid may, instead of applying to the tribunal, apply to the
central government for an order for payment of the money claimed; and the central
government may, if satisfied whether on a certificate by the liquidator or the official
liquidator or otherwise, that such person is entitled to the whole or any part of the money
claimed and that no application made in pursuance of clause (a) is pending in the tribunal,
make an order for the payment to that person of the sum due to him, after taking such security
from him as he may think fit.
(8) Any money paid into the Companies Liquidation Account in pursuance of this section,
which remains unclaimed thereafter for a period of fifteen years, shall be transferred to the
general revenue account of the central government; but a claim to any money transferred may
be preferred under subsection (1) and shall be dealt with as if such transfer has not been
made, the order, if any, for payment on the claim being treated as an order for refund of
revenue.
(9) Any liquidator retaining any cash which should have been paid by him into the
Companies Liquidation Account under this section shall:
(a) Pay interest on the sum held at the rate of twelve percent per year, and also pay such
penalty as might be determined by the Registrar.
(b) Be at risk to pay any cost occasioned by reason of his default; and
(c)Where the winding up has taken place by the tribunal, also be at risk to have such part of
his remuneration as the tribunal may think just to be disallowed and to be expelled from his
office by the Tribunal‖.492
492
204
Section 352. of Companies Act 2013 reads as follows-Company Liquidation Dividend
and Undistributed Assets Account493
This Section provides that:
―(1) Where any company is being wound up and the liquidator has in his hands or under his
control any money representing—
(a) dividends payable to any creditor but which had remained unpaid for six months after the
date on which they were declared; or
(b) Assets refundable to any contributory which have stayed undistributed for a half year after
the date on which they become refundable, the liquidator shall forthwith deposit the said cash
into a different special account to be known as the Company Liquidation Dividend and
Undistributed Assets Account kept up in a scheduled bank.
(2)On the dissolution of the company, the liquidator shall, pay into the Company Liquidation
Dividend and Undistributed Assets Account any cash signifying unpaid dividends or
undistributed resources in his hands on the date of dissolution.
(3) The liquidator shall, while making any payment referred to in sub-sections (1) and
(2), furnish to the Registrar, a statement in the prescribed form, setting forth, in respect of all
sums included in such payment, the nature of the sums, the names and last known addresses
of the persons entitled to participate therein, the amount to which each is entitled and the
nature of his claim thereto, and such other particulars as may be prescribed.
(4) The liquidator shall be entitled to a receipt from the scheduled bank for any amount paid
to it under sub-sections (1) and (2), and such receipt shall be an effectual discharge of the
Company Liquidator in respect thereof.
(5) When voluntary winding up of the company takes place, the Company Liquidator shall,
when filing a statement in pursuance of sub-section (1) of section 348, show the amount of
money which is payable under sub-sections (1) and (2) of this section during the half year
before the date on which the said statement is prepared, and shall, within the time span of
fourteen days of the date of filing of the said statement, pay that amount into the Company
Liquidation Dividend and Undistributed Assets Account.
(6) Any individual who claims to be entitled to any amount paid into the Company
Liquidation Dividend and Undistributed Assets Account, regardless of whether paid in
pursuance of this section or under the provisions of any previous company law may apply to
493
The equivalent provision of sec 555 of Companies Act, 1956, in the Companies Act, 2013 is Sec.352,with
some changes, notified by the MCA, dated 7dec,2016(w.e.f. 15 Dec,2016)
205
the Registrar for payment thereof, and the Registrar, if satisfied that the person claiming is
entitled, may make the payment to that person of the sum due:
Provided that the Registrar shall settle the claim of such person within a period of sixty days
from the date of receipt of such claim, failing which the Registrar shall make a report to the
Regional Director giving reasons of such failure.
(7) Any money paid into the Company Liquidation Dividend and Undistributed Assets
Account in pursuance of this section, which remains unclaimed thereafter for a period of
fifteen years, shall be transferred to the general revenue account of the Central Government,
but a claim to any money so transferred may be preferred under sub-section (6) and shall be
dealt with as if such transfer had not been made and the order, if any, for payment on the
claim will be treated as an order for refund of revenue.
(8) Any liquidator retaining any money which should have been paid by him into the
Company Liquidation Dividend and Undistributed Assets Account under this section shall—
(a) Pay interest on the sum so held at the rate of twelve per cent. per year and also pay such
penalty as might be determined by the Registrar:
Provided that the Central Government may in any legitimate case remit either to some degree
or in entirety the amount of interest which the liquidator is required to pay under this
provision;
(b) Be at risk to pay any expenses arising by reason of his default; and
(c) Where the winding up of the company is by the Tribunal, also be subject to have all or
such part of his remuneration, as the Tribunal may consider just and appropriate, to be
refused, and to be expelled from his office by the Tribunal.‖
In the case of Motor Fin(P) Ltd. V.. ROC494 it was held that where a voluntary liquidation,
amounts due to a creditor are deposited in a scheduled bank and not paid to his heirs as
disputes among them were pending settlement, it has been held that the amount is not
‗unclaimed dividend‘ within the meaning of clause (a) and need not be deposited in the
Reserve bank, as dividend remaining unpaid for six months. The decision was reversed in
appeal on other grounds and not for the reason mentioned above.
494
1970)40 Com Cases6 (AP)
206
A judge of the madras high court held in Union of Indiav. Hindu bank Karur Ltd.495 That
amount deposited and earmarked in the Companies Liquidation Account of the Reserve Bank
of India as unpaid dividends or undistributed assents continue to be assets of the company.
However Ramaiah disagrees with the view, stating the same to be highly untenable.
It was held in Colaba land and Mills Co. Ltd. V. UOI496 that since the purpose of Sec.555 is
to preserve and control the unpaid dividends or undistributed assets of the contributory, or
creditors, respectively, the expression ―any person‖ in subsection 7 of sec.555 cannot be
restricted only to a creditor or member or contributory of the company. The expression can
also include his heir or legal representative but not by the company itself which goes out of
liquidation and regains its original status and position.
It was held in Viyyumma v.Official Liquidator497 that payment can be made to the legal heirs
of a deceased shareholder. It would be necessary for the legal heirs to produce succession
certificate, or a certificate from the Administrator General in appropriate cases. This would
be necessary before orders could be made for payment of official liquidator of amounts due
to the deceased.
It was held in Mittal steel Rerolling & allied industries ltd.Re498 that the official liquidator
cannot make payment to the legal heirs of a deceased shareholder if the amount is more than
Rs. 500 without succession certificate of the administrator general. A tehsildar‘s certificate is
not a substitute to the certificate of the Administrator general.
It was held in Gulzari Lal Bhargava v. Official receiver-cum-official liquidator499 that it is

only when the official liquidator, fails to make good the default within 14 days can the person
approach the court and make an application under this section500 requesting the court to give
necessary directions to the liquidator to make good the default within such time as may be
specified in the order.
495
(1977)47Com Cases224(Mad)
496
(1985)58 Com Cases513(Bom)
497
(1999)98Com Cases571
498
(1999)198CompLJ500(ker)
499
(1972)42Com Cases 401,404,405(Del)
500
Sec556 of companies Act.
207
The term purchase should be broadly interpreted
It was held in the case of Gorakhpur Electric Supply Co. v. Siemens(india)Ltd.501
That the term ―purchase‖ should not be given a narrow restricted interpretation.
It was held in the case of John Brothers v. Official liquidator502 that the word purchase
should not be limited to purchase in the interest of contributory.
So we can say that accounts and audit hold a key position in the issues relating to the issue of
corporate governance and the same assumes magnanimous importance at the time of winding
up as all the stakeholders in a company have to be allocated their dues.503
501
AIR1936All808
502
AIR1940All514
503
The Institute of Company Secretaries of India, Guide to Companies Bill 2012, Taxmann publications, (2012).
208
STRUCTURE OF PREFERENTIAL PAYMENT504
Sec529A has an overriding effect over Sec.530 after the Companies Amendment Act
1985 came into force.
PURPOSE OF Sec.529A- to ensure that the workmen should not be deprived of their
legitimate claims in the event of liquidation of the company.
Following dues are to be paid in priority to all other dues:
Workmen dues
Debts due to secured creditors
Unsecured creditors
Shareholders
According to a judgment given in In Re,Benalpha Products ltd.,505 an expert who is not
under control of the board of Directors of the Company is not an employee and is not entitled
to claim unpaid salary as preferential creditor. The Employees of an insolvent Subsidiary
Company could not claim in winding up of the holding company that for the purpose of
Section 529-A, they should also be treated as employees of holding company, as was decided
in Krishna foundry Employees union v. Krishi Engines Ltd.506
It has been held in Shanmugum(A.)v.Official Liquidator 507 ,that under the provisions of
Sections 529 and 529-A, of the Act, workmen of the company become secured creditors by
the operation of law to the extent of ―workmen‘s dues ―provided there exists secured creditor
by the contract. According to the judgment given in Abdul Hanif v. Shree Ambikajute mills
Ltd., 508 the purpose of Section 529-A is to provide a special relief to the workers of the
distress caused by total displacement. Re-employed workers would rank as ordinary
creditors. It was held in Mysore Spum Ilk Mills Ltd.,Re509that where a bank provided an
overdraft for making a money available for payment of wages, the bank was held entitled to
priority in respect of the sum actually so provided. This priority is confined to the extent to
which the preferential claims have been paid out of the money so provided. It will not apply
to any other payments to the employees in respect of their claims.
504
Supra n.57
505
(1946)16Com Cases182(Ch D)
506
2003 CLC547at p.561
507
(1992)75Com Cases181(mad)
508
(1994)2 Comp LJ86(Cal)
509
(1964)34Com Cases163(Mys)
209
The word ‗asset‘ does not mean ‗free assets‘ alone. It includes all the assets of the company
secured or unsecured, as was held in Barley Corn Enterprises Ltd.,Re510
It was held in Kutti Krishna Menon v. Cochin Mercantiles Ltd511 that an advocate, who was
engaged by the Official Liquidator with the permission of the court, to defent a suit against
the company, is entitled to preferential payment of his fees and expenses, out of the fruits of
litigation which he had successfully conducted for the company which are in the hands of
Official Liquidator.
The Supreme Court has held this in EPF Commissioner v. official liquidator of Essky
Pharmaceuticals Ltd. (2011) that the workers would be entitled to pari passu ranking with
secured creditors.
The priority waterfall for distribution of liquidation proceeds has been drastically changed by
the new, dynamic Insolvency and Bankruptcy Code, 2016. After the expenses of insolvency
resolution, secured debt together with workmen dues for the preceding 24 months rank the
highest in priority.
THE ORDER OF PRIORITY AS PROVIDED WITHIN SECTION 53 OF THE IBC.
Section 53. of Insolvency and Bankruptcy Code,2016 reads as follows-“

(1) Notwithstanding anything to the contrary contained in any law enacted by the Parliament
or any State Legislature for the time being in force, the proceeds from the sale of the
liquidation assets shall be distributed in the following order of priority and within such period
and in such manner as may be specified, namely :—
(a) the insolvency resolution process costs and the liquidation costs paid in full;
(b) the following debts which shall rank equally between and among the
following :—
(i) workmen's dues for the period of twenty-four months preceding the
liquidation commencement date; and
(ii) debts owed to a secured creditor in the event such secured creditor
has relinquished security in the manner set out in section 52;
(c) wages and any unpaid dues owed to employees other than workmen for the
510
(1970)40 Com Cases1169,1175,1178(CA)
511
(1962)Com Cases378,379(Ker)
210
period of twelve months preceding the liquidation commencement date;
(d) financial debts owed to unsecured creditors;
(e) the following dues shall rank equally between and among the following:—
(i) any amount due to the Central Government and the State Government including the
amount to be received on account of the Consolidated Fund of India and the Consolidated
Fund of a State, if any, in respect of the whole or any part of the period of two years
preceding the liquidation commencement
date;
(ii) debts owed to a secured creditor for any amount unpaid following the
enforcement of security interest;
(f) any remaining debts and dues;
(g) preference shareholders, if any; and
(h) equity shareholders or partners, as the case may be.
(2) Any contractual arrangements between recipients under sub-section (1) with equal
ranking, if disrupting the order of priority under that sub-section shall be disregarded by the
liquidator.
(3) The fees payable to the liquidator shall be deducted proportionately from the proceeds
payable to each class of recipients under sub-section (1), and the proceeds to the relevant
recipient shall be distributed after such deduction.
Explanation.—For the purpose of this section—
(i) it is hereby clarified that at each stage of the distribution of proceeds in respect of a class
of recipients that rank equally, each of the debts will either be paid in full, or will be paid in
equal proportion within the same class of recipients, if the proceeds are insufficient to meet
the debts in full; and
(ii) the term "workmen's dues" shall have the same meaning as assigned to it in
(a) section 326 of the Companies Act, 2013.‖512
512
Section 53. of Insolvency and Bankruptcy Code,2016
211
FRAUDULENT PRACTICES PRIOR TO AND DURING THE LIQUIDATION
PROCESS
In common parlance, the liquidator is appointed to take possession of the assets, realize
them and distribute among its creditors and contributories.
Following Sections of the Companies Act, deal with the provisions relating to fraudulent
practices prior to and during the liquidation process.513
Sec.536 of the Companies Act 1956 provides that in the case of winding up by the court, any
disposition of the property of company, and any transfer of shares in the company or
alteration which is made in the status of its members, and which are made after the
commencement of winding up, shall, be void, unless court otherwise orders.514
S.334. of Companies Act 2013 provides that transfers, etc., after commencement of winding
up will be void515
This section provides that-
When a voluntary winding up is taking place, any transfer of shares taking place in the
company, which is a transfer made without the sanction of the Company Liquidator, and in
addition to this any alteration which is made in the status of the members of the company,
after the commencement of the winding up, shall be declared as void.
Where the winding up takes place by the Tribunal, if any disposition of the property takes
place, including within its ambit actionable claims, of the company, and any transfer of
shares in the company or modification taking place in the status of members of the company,
which took place after the commencement of the winding up, shall, be declared void, until
and unless the Tribunal orders otherwise.516
Sec.537 the Companies Act,1956 makes void any attachment or execution, except for
recovery of any tax or impost or any dues payable to the government, after commencement of
winding up unless court grants leave.517
513
Prasad Upendra, Systematic Approach to Business & Corporate Laws, 3rd Edition, Bharat Law house Pvt. Ltd. (2006).
514
the Companies Act,1956
515
Sec334 of the Companies Act,2013,is equivalent to Sec.536 of Companies Act,1956, , notified by the MCA,
dated 7dec,2016(w.e.f. 15 Dec,2016)
516
517
212
Section 335. of the Companies Act,2013 reads as follows- Certain attachments,
executions, etc., in winding up by Tribunal to be void518
This section provides that-
Where any company is being wound up by the Tribunal,—
(a) Without the grant of the Tribunal, it attaches, distress or executes, and which is against
the estate or effects of the company, after the commencement of the winding up; or
(b) If without the grant of the Tribunal, any sale takes place, of any of the assets or effects of
the company, after the commencement of sale, shall be declared as void.
(2) This section further says that nothing in this segment shall apply to any proceedings for
the recovery of any tax or impost or any dues which are payable to the Government. 519
MEANING OF FRAUDULENT PREFERENCE
Section 531(1) of the Companies Act 1956 provides that- Any transfer of property, movable
or immovable, delivery of goods, payment, execution or other act relating to property made,
taken or done by or against a company within six months before the commencement of its
winding up which, had it been made, taken or done by or against an individual within three
months before the presentation of an insolvency petition on which he is adjudged insolvent,
would be deemed in his insolvency a fraudulent preference, shall in the event of the company
being wound up, be deemed a fraudulent preference of its creditors and be invalid
accordingly : Provided that, in relation to things made, taken or done before the
commencement of this Act, this sub-section shall have effect with the substitution, for the
reference to six months, of a reference to three months. 520
Section 531(2) of the Companies Act 1956 provides that for the purposes of sub-section (1),
the presentation of a petition for winding up in the case of a winding up by [the Tribunal],
and the passing of a resolution for winding up in the case of a voluntary winding up, shall be
deemed to correspond to the act of insolvency in the case of an individual.521
518
519
520
Section 531(1) of the Companies Act 1956
521
Section 531(2) of the Companies Act 1956
213
Fraudulent preference522
Section 328 of Companies Act 2013 states that fraudulent preference means that when a
company has given preference to an individual who is one of the creditors of the corporate
entity or is a surety or guarantor for any of the debts or other liabilities of the company, and
the company has done anything or suffers anything done which has the effect of placing that
person into a position which, in the event of the company going into liquidation, would have
been in a better position than the position he would have been in if that thing had not been
done within a time span of six months of making winding up application. If the Tribunal is
satisfied to the extent that such a transaction is a fraudulent preference the tribunal may pass
such an order as it may think proper for restoring the position of that individual to what it
would have been if the company had not been given that preference.
In addition to this if the Tribunal is contended that there has been made a preference transfer
of property, either movable or immovable, or any delivery of goods has taken place, payment,
and execution being made, taken or done by or against a ‗company‘ within a time span of six
months before making the winding up application, the Tribunal may pass such an order as it
may think proper and may declare such transaction to be void and restore the position.523
A favoured treatment to one creditor must be proved to call it fraudulent preference. It has
been held in Monark Enterprises v. Kishan tulpule524, that the law does not presume the
transaction to be a fraudulent preference merely because it was ended within a period of six
month prior to the commencement of winding up, to be proved a transaction to be a
fraudulent one, it must also be a fraudulent preference under the insolvency law and must
have been entered into within a period of six month before the commencement of winding up.
In Blackpool Motorcar Co. Ltd., Re, Hamilton v. Blackpool Motorcar Co. Ltd.525, it was
held that where the directors make payments or does any other act in favor of a creditor
solely within a view to avoid civil or criminal proceedings that will not be a fraudulent
preference. The transfer made in favor of a particular creditor, if made to discharge a legal
obligation, as to prevent hardship to a creditor will not be a fraudulent preference but if made
to discharge a moral obligation, then it would be invalid and void. 526 The word ‗preference‘
relates to an act that is done by ‗free will‘ and there should be no use of ―pressure‖. It was
522
523
524
(1992)74 Com Cases89 at 107 (Bom)
525
(1901)1Ch 77
526
Re,Jackson & Brassford,(1906)2Ch467
214
held in Manekchowk & Ahmedabad Mfg.Co.Ltd.,Re,527if the transaction was done not with
a view to prefer one of the creditors, but to safeguard own interest, the transfer could not be
treated as fraudulent preference. Moreover if the transaction was entered into as a result of
lawful pressure of a bona fide creditor to recover his dues the transaction could not be treated
as fraudulent preference. In the case of Ashok Oil Products P.Ltd. v.Ashok Kumar Dalmia528
,where assets were transferred to some of the creditors to the exclusion of others, who were
similarly situated, the board of Directors was held guilty of exercising fraudulent preference
and sale deeds were annulled and set aside.
Section 531A. of Companies Act 1956 reads as follows- AVOIDANCE OF
VOLUNTARY TRANSFER
Any transfer of property, movable or immovable, or any delivery of goods, made by a
company, not being a transfer or delivery made in the ordinary course of its business or in
favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made
within a period of one year before the presentation of a petition for winding up by 1 [the
Tribunal] or the passing of a resolution for voluntary winding up of the company, shall be
void against the liquidator.529
Sec.329. of Companies Act 2013-Transfers not in good faith to be void530
This Section provides that any transfer of property, movable or immovable, or any delivery of
goods, made by a company, not being a transfer or delivery made in the ordinary course of its
business or which is made in favour of a purchaser or encumbrance that are made in good
faith and for valuable consideration, if they are to be made within a period of one year before
the presentation of a petition for winding up of a company by the Tribunal or by the passing
of a resolution for the company to be wound up voluntary, shall be declared as void against
the Company Liquidator.531
It was held in Hind Iran Bank Ltd. V. Raizada jahan Nath Bail,532that for the purposes of
Section 531 if the resolution for voluntary winding up was followed later by compulsory
winding up petition, the determining date is not the date of the resolution, but the date of
presentation of petition for compulsory winding up on which the court ordered winding up.
527
(1970)40Com Cases819 at 847.
528
(1998)4Com Cases269(raj)
529
Section 531A. of Companies Act 1956
530
Sec329 of the Companies Act,2013,is equivalent to Sec.531A of Companies Act,1956, , notified by the MCA,
531
Sec.329. of Companies Act 2013
532
(1959)29Com Cases418(punj)
215
In Sushil Prasad v. Official Liquidator, Vinod Motors Pvt. Ltd.533, there was an oral charge
over the company‘s assets in good faith for valuable consideration received was duly
authenticated by the company by necessary resolutions and thereafter filed with registrar of
companies. The company was wound up in ten months thereafter. The charge was held to be
valid as it was created in good faith and for valuable consideration. It related back to the date
of oral agreement. Though the charge was created within six months before the filing of
winding up petition but it was held by the court that it was not in contravention of Sec.531 of
the Companies Act.
An application under Sec.531A (now Sec.329 of Companies Act, 2016) for setting aside a
transfer can be allowed where either it is proved that there was no consideration for the
transaction or that the consideration was so inadequate as to raise a presumption of want of
good faith. Even if there was valuable consideration the liquidator may show want of good
faith in the sense that the transferee entered into the transaction with the knowledge of all the
circumstances with a view to shield the assets of the claims of the creditors. The lack of bona
fide in the transferee must be proved. He cannot be affected by the dishonest course of
conduct of the transferor company. This was held in Sunder Lal Jain v. Sandeep Paper
mills(P.)Ltd.534 Thus the crucial question in all cases is whether the transferor‘s dominant
intention was to deny assets to the creditors or it was bona fide transaction.
In Bidyut Baran Bose v. Official Liquidator535, the company‘s property was sold and its
possession was delivered within one year prior to commencement of winding up. The
transaction appeared to have been made neither in good faith nor in ordinary course of
business. The sale deed was also executed after commencement of winding up. The
transaction was held to be void under Sec.531A and 536(2)536.
In Re Washington Diamond mining Co.537 , it was held that, a director who paid to the
company the amount remaining unpaid on his shares and received at the same time from a the
company a cheque for a like amount as his fees signed by himself and another director, both
the directors were held equally responsible and were ordered to repay the amount. So the
533
(1984)55Com Cases52(Del)
534
(1986)60Com Cases77(P&H)
535
(1980)TaxLR(NOC)151(Cal)
536
Which tells that in the case of winding up by the court, any disposition of the property of the company, and
any transfer of shares in the company or alteration in the status of its members, made after the commencement
of winding up, shall unless the court orders otherwise, be void.
537
(1983)3Ch95
216
directors who make payment by way of fraudulent preference are jointly and severally liable
to repay the amount.
In Peaks &Hall Ltd.,In Re538 it was held that a director who was ignorant of the company‘s
insolvency and the intent of other directors to defraud the creditors is not personally liable for
the company‘s debts even if ignorance was due to failure to perform his duties as a director.
If any transaction is made by the company, during the ordinary course of business, without
causing harm to the general body of creditors, then it comes out as a bona fide transaction and
can be validated by the court.
It was held in Re,Grey’s Inn Construction Co. Ltd., 539 that the court while using its
discretion relating to transaction during winding up, the court should not validate a
transaction which results in pre-liquidation creditor being paid in full at the expense of other
creditors unless to do so would benefit the unsecured creditors as a whole.
538
(1985)PCC87(Ch D)
539
(1980)1All ER814:(1982)1Comp LJ255(CA)
217

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CHAPTER -6

WINDING UP AND ROLE OF LIQUIDATOR IN

WINDING UP AND ROLE OF LIQUIDATOR IN WINDING UP OF

This chapter shall deal with:

THE GROUNDS OF COMPULSARY WINDING UP Sec.433 ARE AS FOLLOWS:410

CIRCUMSTANCES IN WHICH COMPANY MAY BE WOUND UP BY TRIBUNAL ARE

Section 441 of Companies Act, 441 reads as- COMMENCEMENT OF WINDING UP BY

The date of commencement of winding up is very important as it affects many matters. It

PROCEDURE AFTER WINDING UP ORDER

POWER OF THE TRIBUNAL TO STAY WINDING UP

APPEAL FROM ORDERS

THE GROUNDS OF VOLUNTARY WINDING UP ARE AS FOLLOWS:

Section 484. of the Companies Act,1956 reads as- CIRCUMSTANCES IN WHICH

MEMBERS’ VOLUNTARY WINDING UP

Sec.488.(1) of Companies Act 1956,reads as- DECLARATION OF SOLVENCY IN

Section 502. of the Companies Act,1956 reads as- APPOINTMENT OF LIQUIDATOR

SECTION 275. of COMPANIES ACT, 2013-COMPANY LIQUIDATORS AND

Section 359. of the Companies Act,2013 reads as follows- Appointment of Official

CREDITORS’ VOLUNTARY WINDING UP

POSITION PRIOR TO NOVEMBER 15, 2016

• Part IV managing appointment of official liquidator.

POSITION AFTER NOVEMBER 15, 2016

Winding up on inability to pay debts

As soon as the application is admitted, a moratorium in terms of Section 14 of the Code is to

 Voluntary winding up461

Winding up proceedings to be transferred from High Court to Tribunal

LATEST DEVELOPMENT IN VOLUNTARY WINDING UP

The Liquidation Process

The New Role of a Liquidator

Liability Provisions of Liquidation

1. By the Adjudicating Authority:

a. Under Section 70(2), it is provided that any bankruptcy professional who

The Board may:

A. ‗Upon direction of the Adjudicating Authority‘ under Section 47(2);

Report by Official Liquidator

Section 455. of Companies Act 1956 reads as follows-REPORT BY OFFICIAL

Custodian of company’s property466

Section 456.of Companies Act 1956 reads as follows- CUSTODY OF COMPANY'S

Sec.283. Custody of company’s properties467

MAINTENANCE OF ACCOUNTS AND AUDIT

Section 548. of Companies Act,1956 reads as follows-BOOKS AND PAPERS OF

Section 551.of Companies Act 1956 reads as follows- INFORMATION AS TO

Meaning of the phrase “within one year”

Irregular appointment of liquidator, the matter being challenged in court is no excuse

Official liquidator to make payments into the public accounts of India

Section 552. of Companies Act 1956 reads as follows- OFFICIAL LIQUIDATOR TO

Section 553. of Companies Act 1956 reads as follows- VOLUNTARY LIQUIDATOR

Section350. of Companies Act 2013 reads as follows- Company Liquidator to deposit

Keeping of bank accounts is an important and essential part of Liquidation process.

Unpaid dividends and undistributed assets to be paid into Companies Liquidation

It was held in Gulzari Lal Bhargava v. Official receiver-cum-official liquidator499 that it is

It was held in the case of Gorakhpur Electric Supply Co. v. Siemens(india)Ltd.501

THE ORDER OF PRIORITY AS PROVIDED WITHIN SECTION 53 OF THE IBC.

Section 53. of Insolvency and Bankruptcy Code,2016 reads as follows-“

MEANING OF FRAUDULENT PREFERENCE

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