DEFINITION

1. Winding up is a method of dissolving an organization or association by auctioning off

the entirety of its resources, gathering any outstanding income, ensuring that creditors
are paid from the returns, and appropriating anything that remains over (net assets).
2. Anything that remains over might be conveyed in cash or in kind, at first to the
preferred shareholders, and afterward to the remaining stockholders.
3. It is synonymous to ‘liquidation’ which is the process of converting assets to cash.
4. Winding up due to fraudulent conduct of business is defined under S339[1]: if in the
course of the winding-up of an organization, it creates the impression that any
business of the organization has been continued with an aim to cheat creditors of the
organization or some other people or for any fraudulent purpose, the Tribunal may, if
it thinks it proper so to do, declare that any person, who is or has been a director,
manager, or officer of the company or any people who were intentionally parties to
the carrying on of the business in the way aforementioned.
5. The proceedings of winding up are governed under the provisions of the Companies
Act 2013 as well as the Insolvency and Bankruptcy Code 2016.
6. The winding-up of a company may be processed through ways that are mentioned in
S270.
7. Section 248 provides discretionary powers to the registrar to remove the names of
companies from the register of companies under reasonable cause.

Modes: By the National Company Law Tribunal (NCLT), Voluntary Winding Up, The
Fast Track Exit Scheme

WINDING UP BY THE TRIBUNAL

1. As per Section 271, a company can be wound up by a tribunal under six
conditions:
A. If the company is unable to pay prior pending debts;
B. If the company has by the means of special resolution resolved that it be wound
up by the tribunal;
C. If the company has acted against the interest of the integrity or morality of India,
the security of the state, or has spoiled any kind of friendly relations with foreign
or neighbouring countries;
D. If the Tribunal passes an order for the company to be wound under chapter XIX;
E. If the Tribunal comes to the conclusion that the company has engaged in
fraudulent activities or was formed for unlawful purposes or the persons who have
been engaged in the formation of the company have priorly been guilty of fraud;
F. If the company defaults in the filing of financial statements or annual returns with
the registrar for immediately preceding five consecutive financial years;
G. If the Tribunal finds that it is just and equitable that the company be wound up;
2. Filling of the winding up petition:
A. Section 272 provides that a winding up petition can only be presented to the
Tribunal by the entities:
- The company
 - The creditors; or
- Any contributory or contributories,
- By the central or state govt.
- By a registrar authorized by the central govt. for that purpose
B. Final Order and its Contents:
The tribunal in the wake of hearing the appeal, has the ability to excuse it or to
make an interim request as it might see fit or it can appoint the provisional
liquidator of the organization till the passing of winding up order.
3. /

VOLUNTARY WINDING UP
1. The procedure for Voluntary winding up of the company has been stated in the
Insolvency and Bankruptcy code, 2016 and is applicable to a corporate person.
2. The decision to voluntarily wind up a company can be made after the approval of its
members after which the process of liquidation is set in motion.
3. aim to discontinue operation, liquidate its assets and distribute them while also paying
off the debts.
4. The procedure as stated under the Insolvency and Bankruptcy Code,2016:
A. S59 clause 1[7]: voluntary liquidation proceedings of an organization, company, a
business can only be initiated by a corporate person who has committed any
default.
B. The Directors of the company make a declaration of bankruptcy in the form of an
affidavit.
C. The Board of directors need to recognize a registered insolvency professional,
who will act as the liquidator and conduct the voluntary wound up process.
D. Convene a meeting of the board of directors.
E. A general meeting of the shareholders has to be convened within 4 weeks of the
declaration of solvency.
F. The appointed professional liquidator files the resolutions to the Registrar of
companies and the Insolvency and Bankruptcy Board of India.
G. The process of voluntary liquidation is said to be in process from the date of the
filing of the resolutions subject to the approval of the creditors.
H. The appointed professional liquidator takes charge of the company and has the
powers to consult any shareholder who is entitled to the distribution of proceeds.
I. The appointed liquidator is to make a public announcement within 5 days of his
assignation.
J. The liquidator is to file a preliminary report under 45 days from the initiation of
the liquidation.
K. The report is to be submitted to the company.
L. A bank account is opened by the liquidator in a scheduled bank under the name of
the company with the words “in voluntary liquidation” following it, to receive
all the dues and realize the assets to meet the cost of liquidation.
M. A No-objection letter is to be obtained by the liquidator from the tax authorities of
the place where the registered office of the company is situated.
 N. The liquidator will recuperate and understand the resources of the organization in
a time bound way maximizing the estimation of the shareholders.
O. The assets realized will be stored in the bank account opened for this reason.
P. The cash which is realized from the profits will be dispersed to the shareholders.
Q. The process of liquidation has to be completed by the appointed liquidator within
12 months from the date of initiation of the liquidation.
R. After the liquidation process is complete the liquidator has to prepare a final
report to the Registrar and the Insolvency and Bankruptcy Board of India.
S. An application is made to the National Company Law Tribunal for the dissolution
of the company who then pass an order after which the company is said to stand
dissolved.

WINDING UP THROUGH FAST TRACK EXIT SCHEME

1. The Ministry of Corporate Affairs informed S248 of the Companies Act, 2013 on
26/10/2016.
2. The part manages the power of the Registrar to eliminate the name of a Company
from the Register of Companies.
3. This segment gave an occasion to defunct/idle Companies to get their names struck
off from the Register.
4. invite measure for huge corporates to shut down a portion of their non-operative
Companies and evade yearly Compliance costs.
5. S248(1) of the Act states the circumstances under which a non-functioning company
can have its name denounced.
6. Conditions under which the registrar can send a notice and strike off the name of a
company:
A. A company fails to commence operations within one year of its incorporation
B. The organization isn’t continuing any business or activity for a time of two
immediately preceding fiscal years.
7. The procedure for the aforementioned wind up is expressed under S248(2)[10] of the
Companies Act, 2013.
8. The modus operandi of a company to apply to a Registrar for striking off its name:
A Company can after extinguishing all its liabilities file an application along with fees
of INR 5000/- to the Registrar for removing the name of the company from the
register of companies on all or any of the grounds designated under Section 248 (1)

GROUNDS FOR COMPULSORY WINDING UP

The winding up of a company by the order of court is called compulsory winding up.

S433 of the Act, 1956 envisaged the following circumstances under which the affairs of a
company wound up by the Tribunal:

1. If the company, of its own, passes a Special Resolution that it should be wound up by
the court, and presents a petition to the court for same.
2. If the company makes any default in filing the statutory report with the registrar of
companies or in holding the statutory meeting within the prescribed time
 3. If the company does not commence business within one year from the date of its
incorporation or suspends its business for a whole year
4. If the number of members falls below seven in the case of a public company, and
below two in the case of a private company.
5. If the company is unable to pay its debts
6. If the court is of the opinion that it is just and equitable that the company be wound
up.
7. If the company has made default in filing its Balance sheet and Profit and Loss
account or annual return for any five consecutive financial year.
8. If the company has acted against the sovereignty or integrity of India, the security of
the state or friendly relation with foreign state etc,
9. If the tribunal is of the opinion that the Company should be wound up under
circumstances mentioned under Section 424G (sick company).

GROUNDS FOR VOLUNTARY WINDING UP

1. Winding up the affairs of a company either by its members or by its creditors, without
any interference of court it is called voluntary winding up of a company.
2. Section 484 of the Act, 1956 lays down the following circumstances under which a
Company may wound up voluntarily:
A. By passing Ordinary Resolution: When the period fixed for the duration of the
Company by its Article has expired or the event, if any, on the occurrence of
which the Article provides that the Company is to be dissolve, the Company may
wound up voluntarily by passing a Ordinary resolution in the General Meeting.
B. By passing Special Resolution: The members of the company may, at any time by
passing a Special Resolution, wound up the affairs of the Company voluntarily.
No reasons need to be given when majority of the members decided to wind up
the Company.

APPOINTMENT OF LIQUIDATOR
1. Liquidator is an officer appointed by the creditors of the company (in case of
Creditor’s Voluntary Winding up) or by the members of the Company (in case of
Members’ Voluntary Winding up), when the company goes into winding up or
liquidation voluntarily.
2. A company may appoint an insolvency practitioner (CA, CS or Lawyer) to whom it
wishes to act as a liquidator for the purpose of voluntary winding up.
3. However, the Official liquidator is appointed by the Central Government as per S448
of the Act, 1956 who shall be attached to the High Court of the state for the purpose
of conducting liquidation proceeding or say winding up proceeding of those
companies which are ordered to be wound up by the Tribunal.
4. Functionally the Official Liquidator is under the supervision and control of the High
Court but administratively is under the control of the Central Government through the
Regional Director
5. In case of Compulsory winding up, the liquidator is appointed by the Court.
 6. In case of Voluntary winding up, the liquidator is appointed either by the members or
by the members and creditors, both.

PROCEDURE FOR VOLUNTARY WINDING UP

Voluntary wind up is initiated when the members of the company mutually decide to shut
down the company and make the end of its existence.

When the members are unable to maintain it, or unable to make the desired profit, or any kind
of disputes among the partners, etc. then the shareholders or members mutually decide not to
continue the business operation.

All the shareholder distributes its assets and pays all the remaining debts and after that, they
discontinue their business operation.

PROCEDURE:

1. The directors of the company have to make a declaration that

- the company is solvent and will pay all the remaining debt in full
- the company has not committed any default of repayment of the debt
- the company is not being liquidated or winding up for defrauding any person.
2. The board will appoint an insolvency professional who will act as a liquidator for
conducting the liquidation process.
3. Assemble the board of directors for approving the voluntary liquidation of the
company, appointment of a liquidator, and fixing day date and time for the general
meeting of the company and issue notice containing the proposed resolution along
with an explanatory statement.
4. Assemble the general meeting of the shareholder within 4 weeks of the declaration of
solvency.
5. The liquidator will conduct the liquidation process. He takes control over the
company, assembles its assets, settle all the dues of the company, pays all the
remaining debts, and distribution of the assets to the shareholder.
6. The liquidator shall make a public announcement within 5 days from his appointment
calling stakeholders to submit their claims within 30 days from the liquidation
commencement date.
7. The liquidator shall submit a preliminary report stating the capital structure of the
corporate person, estimates the assets and liabilities based on the book of a corporate
person, and the proposed plan of action for carrying out the liquidation.
8. The liquidator opens a bank account in a scheduled bank in the company’s name
followed by the words “in voluntary liquidation” for receiving all the money dues and
realized to meet liquidation cost.
9. The liquidator has to obtain a no-objection tax from the tax authorities where the
registered office of a company is situated.
10. The liquidator shall recover the assets of the company in a time-bound manner.
11. The money recovers from the proceeds shall be distributed to the stakeholders within
6 months from the receipt of the amount after deducting the liquidation cost.
 12. The liquidator has to complete the process of its liquidation with 12 months from the
date of the commencement.
13. After the completion of the liquidation process, the liquidator has to make a final
report which contains:
- Audited accounts of liquidation.
- A statement showing the assets are disposed of, debts are paid, and no
litigation is pending.
- A sale statement of assets to whom it is sold, mode and manner, etc.
14. The liquidator shall then file the final report to the registrar and the IBBI.
15. After receiving order passed by the tribunal, the registrar then publish a notice in the
official gazette declaring that the company is dissolved.

POWERS OF LIQUIDATORS
1. Powers to be exercised only with court sanction:
A. To institute or defend any suit, prosecution or other legal proceedings, civil or
criminal in the name of the company.
B. To carry on the business of the company.
C. To sell the immovable property and actionable claims of the company by public
auction or private contract with power to transfer the whole thereof to any person
or body corporate.
D. To raise the required money as the security of the assets of the company.
E. To appoint an advocate, attorney or pleader entitled to appear before the court to
assist him in the performance of his duties.
F. To compromise call, debts and other pecuniary liabilities with contributories or
debtors and take any security in discharge of any such claim and give a complete
discharge in respect thereof.
2. Powers to be exercised without court sanction:
A. To do all acts and to execute on behalf of the company all deeds, receipts and
other documents and for the purpose to use, when necessary, the company’s seal.
B. To inspect the records and returns of the company on the files of the Registrar
without payment of any dues.
C. To prove rank and claim in the insolvency of any contributory, for any balance
against his estate.
D. To receive dividends in the insolvency, in respect of any balance against his
estate, as a separate debt due from the insolvent and rateable with other creditors.
E. To draw, accept, make and endorse any bill of exchange, hundi or promissory note
on behalf of the company.
F. To take out in his official name, letters of administration to any deceased
contributory, and to do any other act necessary for obtaining payment of any
money due from a contributory or his estate which cannot be conveniently done in
the name of the company.
G. To appoint an agent to do any business which the liquidator is unable to do
himself.
DUTIES OF LIQUIDATOR
The liquidation of a company is the process of conducting an investigation into the
company’s affairs, cessation of the company’s activities, the realization of the company’s
assets, the payment of the company’s creditors to the extent possible and, if after having
discharged the company’s debts there are any surplus funds, distribution of same to the
members. The company is then dissolved, terminating its legal existence.

When a Liquidator of a company is appointed, he is bound to perform many functions/ duties

which are provided under various provisions of the laws:

1. Duty to provide notice

A. Has a duty of providing notice of his appointment.
B. S178 (b) of the Income tax: who has been appointed as the liquidator shall, within
thirty days after he has become such liquidator, give notice of his appointment to
the Assessing Officer who is authorized to assess the income of the company.
C. Without adhering to this requirement such person shall not be capable of acting as
liquidator.
D. Sections 275(6) and 310 (4) of the Indian Companies Act 2013 make it mandatory
for the Company liquidator and the provisional liquidator to file such a declaration
disclosing conflict of interest or lack of independence, if any, within 7 days of
their appointment to the tribunal.
E. Moreover, all letters, invoices or orders issued must describe the company as
undergoing liquidation.
2. Duty to investigate into the affairs of a company from its inception:
A. The liquidator has a duty to examine the conduct of the company’s present and
past officers and to see if they are guilty of any unlawful conduct in handling the
company’s affairs.
B. may obtain all the necessary information which he reasonably requires in the
course of winding up and accordingly all officers of the company are bound to
inform him of any relevant issue.
C. In case of any default, the officers will be committing an offence.
D. This function of the liquidator comes into effect through the provision of S277 (5)
(ii) which makes it clear that it is the function of the liquidator to investigate into
the state of affairs of the company.
3. Duty to recover and realize the company’s assets:
A. The foremost duty of a liquidator is that of the recovery and realization of the
assets of the company.
B. All his powers are designed to ensure the effective discharge of this duty.
C. As given in S277 (5) (iii), this is the fundamental duty of a liquidator.
D. The liquidator must recover the assets of the company for the benefit of its
creditors and members.
E. He has to take into his custody and control, all the property, actionable claims etc.
and to take such steps necessary to protect and preserve the properties of the
company.
 F. This duty is confirmed under the Section 283.
G. This is to effect the best possible distribution.
H. Cases in which there are actual questions as to the veracity of the company’s
management and to the quality of its record-keeping and accounting function, it
will be an important part of a liquidator’s function to ensure that he obtains
control of the records and books so that he can engage in all the necessary
investigations of transactions of the company.
I. Once he has taken control over all the necessary books and records and also
recovered all the property of the company then he must realize the said property
J. if the realization has been done by way of a sale, he may act in the name of the
company and sign or execute all the necessary documents.
K. This is done so that the next step could be taken in furtherance and so that the
company’s creditors can be paid.
L. In the case of compulsory winding, the court shall cause the assets of the company
to be collected and to be applied in the discharge of the company’s liabilities.
M. In practice, this duty has to be fulfilled by the liquidator and not by the tribunal.
N. S277 (5) (v) makes it clear that it is the function of the liquidator to cause the sale
of the assets of the company.
O. And in case where the assets are not sufficient to pay off the company’s liabilities,
the liquidator must distribute the proceeds by the way of dividends between those
creditors who have proved their debts.
P. Each creditor is paid in accordance with his order of priority and in proportion to
the amount due to him.
4. Duty to form winding up committee and make reports
A. Within 3 weeks from the date of passing of winding up order, the liquidator is to
make an application to the tribunal for the constitution of a winding up committee
under S277 (4).
B. The winding up committee shall comprise of: Official liquidator attached to the
tribunal; Nominee of secured creditors; and a professional nominated by the
tribunal.
C. Duty to hold meetings of the said winding up committee and be the convener of
such meetings and to record the minutes of such meetings.
D. Section 277 (6) obligates a liquidator to file a report of the meetings of the
committee along with the minutes recorded of the meetings
E. S288: to make periodical reports, with respect to the progress of the winding up of
the company, to the tribunal. And on the basis of such a report the tribunal may
review its orders and make such modifications as thinks fit.
5. Peripheral duties:
A. To Act Impartially
- A Liquidator is accountable to the court, creditors and shareholders
- duty to maintain an even and impartial hand among all the persons whose
interest are involved in the winding up proceedings of the company.
 - duty to make himself thoroughly acquainted with the state of affairs of the
company, and also about the technical hurdles that the company is facing.
- has to act fairly and honourably in considering the claims of persons against
the company.
B. To act with skill and diligence:
- A liquidator owes a duty to act with care and efficiency.
- He has a duty to exercise his particular professional skills to complete the
winding up process and he shall incur liability if he fails to show the required
degree of care and skill which, by accepting the office, he holds himself out as
possessing.
- Therefore, a high standard of care and diligence is required of a liquidator.
- He must act reasonably in all the circumstances.
- He should always avoid placing himself in a position where personal interests
could conflict with professional duties.
C. To maintain Confidentiality:
- The liquidator happens to be a person who is acquainted with all the state of
affairs of the company and he also happens to be the one who has all the
records and accounts of the company.
- Duty to maintain all these records and accounts safely and should not disclose
this information to a person who is not authorized to see these documents.
- Must not disclose information about the case to any person who does not have
a legitimate reason to have the details of the case.

INSOLVENCY AND BANKRUPTCY

1. The law of insolvency and bankruptcy aids in the restructuring of a company’s
various assets as well as the dissolution of these assets.
2. The Insolvency and Bankruptcy Code, 2016, is comprehensive legislation that
incorporates both the subsequent elements of a debtor’s economic collapse –
rehabilitation and liquidation – within its multiplicity.
3. The primary goal of the legislation is to restructure and resolve the insolvency of
corporate people, partnership companies, and individuals as soon as possible in order
to leverage the maximum value of such persons’ assets.
4. While doing so, it is also important to boost entrepreneurship and credit availability.
5. Insolvency refers to a situation in which a corporation is unable to obtain sufficient
cash to pay off its obligations and payments in a timely manner.
6. Bankruptcy occurs when the court identifies and recognises insolvency while ignoring
instructions for its resolution.
7. When the court is confident that the business is insolvent, it issues an order dividing
the proceeds among the creditors for the payment of the company’s debts.

Insolvency and bankruptcy code, 2016

8. The IBC was proposed by the Bankruptcy Legislative Reforms Committee, led by TK
Viswanathan.
9. goal was to consolidate and reform laws governing the reorganisation and economic
resolution of businesses and persons in a timely way in order to maximise the value of
assets.
10. The major goal of the insolvency legislation was to correct the faults made by
previous legislation by separating commercial and judicial issues
11. The adjudicating bodies, according to the IBC, are the NCLT.
12. Given that the IBC is the umbrella legislation that encompasses other insolvency
laws, it has diminished the need for prior legislation by addressing insolvency,
bankruptcy, and sick company reorganisation.
13. It was enacted because India lacked legislation that aided in the resolution of
distressed assets and debt-laden companies. As a result, the court consolidated all
insolvency rules into a single legislation, the IBC 2016.
14. Intended to increase the flexibility of India’s insolvency rules.
15. It allows creditors to evaluate the feasibility of a business, decide the inspiration of
the firm, and then request the liquidation or winding down of the business.
16. The code’s goal was to create a new institutional framework that included a regulator,
financial condition experts, data utilities, and assessment mechanisms to improve the
formal financial condition resolution procedure and liquidation.
17. Institutional Framework of Insolvency and Bankruptcy Code, 2016:
It has 4 pillars:
A. Insolvency and Bankruptcy Board of India
B. National Company Law Appellate Tribunal
C. Insolvency Professional
D. Information Utilities
18. IBBI:
A. The board’s deployment and functioning are overseen by the Insolvency and
Bankruptcy Board of the Republic of India.
B. The IBC creates it as a restricted yet superior body.
C. Is in charge of IBC concerns and controls not just the profession but also the
processes.
D. Critical in implementing the code that modifies the regulations governing the
conversion of bankrupt enterprises.
19. NCLT:
A. The NCLT, which is the adjudicating authority, hears cases involving this code
under insolvency law.
B. Serves as a venue for the settlement of insolvency proceedings.
C. An appeal under the NCLT can be dismissed, or a stay of execution can be
requested against the order.
D. NCLAT is the site where NCLT appeals may be filed.
E. The ruling of the NCLAT can be appealed to the Supreme Court.
20. Insolvency professionals
A. The IBC establishes a body of experts known as insolvency professionals, who are
responsible for overseeing different parts of bankruptcy resolution.
 B. To govern the activity of the Insolvency Professionals, an extra corporate
organisation called the Insolvency Professional Agencies is formed.
C. Individual practitioners must be enrolled with the IPAs’ sceptre in order to control
and enhance the function of insolvency professionals
21. Information utilities
A. The information utilities under the IBC, 2016, make it feasible to acquire and
transfer information from creditors to corporations.
B. Currently, creditors’ financial information may only be acquired through the
income tax department.
C. The purpose of the information utilities is to bridge the gap in obtaining and
transmitting information from creditors to corporations.
D. Only the Republic of India’s Insolvency and Bankruptcy Board has the ability to
license Information Utilities, as well as the capacity to regulate them and give
access to information.

DEFUNCT COMPANY
1. A company which is not carrying on any business or which is not in operation is
called a defunct company.
2. In a general circular, issued by the Ministry of Corporate Affairs (MCA) the defunct
companies have been described as that:
certain companies have been registered under the Companies Act, but due to various
reasons some of them are inoperative since incorporation or commenced business but
became inoperative later on and are not filing their due documents timely with the
Registrar of Companies. These companies may be defunct and are desirous of getting
their names strike off from the Register of Companies.
3. Where the company is not carrying any business or operation or it has discontinued
the operations completely, then it can make any application to the Registrar of
Companies for declaring it as defunct company.
4. This is the easiest and shortest method for dissolving of any company.
5. After being declared as defunct, the name of the company is removed from the
records of the Registrar of Companies.
6. The capacity of the company ceases on becoming defunct.
7. Where the date on which a suit was filed in the name of the company it had been
struck off the Register as being defunct, the proceeding was held to be not valid.
8. S560 of the Companies Act, 1956 dealt with the 'Power of Registrar to strike defunct
company off register'.
9. With modification of this provision, it is reincorporated in S248 of the 2013
Companies Act, with the 'Power of Registrar to remove name of company from
register of companies.
10. Striking of the name of the register:
A. Three grounds are prescribed under Section 248(1) of the Companies Act, 2013
for removing the name of the company from the register of the companies.
B. When any or all of the three mentioned grounds are satisfied, then the name of the
Company could be strike off from the register of the companies.
 1: when, a company has failed to commence its business within one year of its
incorporation.
2: when the subscribers to the memorandum have not paid the subscription which
they had undertaken to pay within a period of 180 days from the date of
incorporation of a company and a declaration under sub-section (1) of S11 to this
effect has not been filed within 180 days of its incorporation
3: when a company is not carrying on any business or operation for a period of
two immediately preceding financial years and has not made any application
within such period for obtaining the status of a dormant company under section
455.
11. Procedural requirements
A. When the registrar has the reasonable cause to believe that all or any of the above
three mentioned grounds are satisfied by any company then, he shall send a notice
to the company and all the directors of the company, of his intention to remove the
name of the company from the register of companies.
B. The registrar shall also request them to send their representations along with
copies of the relevant documents, if any, within a period of 30 days from the date
of the notice.
C. The second method of removing the name of the Company from Register is by on
its own motion by the Company.
D. A Company may by a special resolution or consent of 75% members in terms of
paid-up share capital, file an application in the prescribed manner to the Registrar
for removing the name of the company from the register of companies on all or
any of the above three grounds specified Section 248(1).
E. The Registrar shall issue a public notice in the prescribed manner on receipt of
such application. But this provision does not apply to the companies registered
under any special law.
F. When the company is regulated by any special Act then approval of concerned
regulatory body constituted or established under that Act shall also be obtained
and enclosed with the application.
G. But this second method of removing the name of the Company is not applicable to
Companies which are registered under Section 8 (Companies with charitable
objects).
H. The notice issued by the registrar under the above two mentioned method shall be
published in the prescribed format and also in the Official Gazette for the
information of the general public.
I. In the case of Sitaram Singh Construction P. Ltd v. Union of India, the
Registrar of Companies had neither published the notice in the Official Gazette
nor sent the notice to the company by registered post as required under Section
560(3) of the Companies Act, 1956. On the other hand, the company was
continuously carrying on business. It was held that although, there was a serious
omission on the part of the company in not filling its annual returns, the
mandatory requirement under Section 560(3) of the Act was not complied with by
 the Registrar. Therefore, the notice issued under Section 560(5) of the Act was to
be quashed and the name of the company was to be restored.
12. Power of registrar
A. Before striking off the name of company, the registrar shall satisfy himself that
sufficient provision has been made for the realisation of all amounts due to the
company and for the payment or discharge of its liabilities and obligations by the
company within a reasonable time.
B. If there arises any necessity the registrar can obtain necessary undertakings from
the managing director, director or other persons in charge of the management of
the company.
C. Notwithstanding the undertakings taken by the registrar from the director, the
assets of the company shall be made available for the payment or discharge of all
its liabilities and obligations even after the date of the order removing the name of
the company from the register of companies.
D. Despite the striking off the name of company, the liability, if any of every
director, manager or other officer who was exercising any power of management,
and of every member of the company, shall continue and may be enforced as if the
company had not been dissolved.
E. After the expiry of the time mentioned in the notice the registrar may, unless
cause to the contrary is previously shown by the company, strike its name off the
register and shall publish notice thereof in the Official Gazette,
F. on the publication of this notice in the Official Gazette, the company shall stand
dissolved.
13. Restrictions on Company for making Application to strike off its name:
A. An application under S248(2), by the company on its own motion is prohibited in
certain circumstances.
B. These conditions are given under S249(1) of the Companies Act, 2013.
C. If the Company files an application under Section 248(2) in violation of the
conditions specified in Section 249(1), it shall be punishable with line which may
extend to one lakh rupees.
D. An application filed under subsection (2) of S248 shall be withdrawn by the
company or rejected by the Registrar as soon as conditions under Section 249(1)1
are brought to his notice.
E. The Conditions are that:
The company shall not made application if at any time in the previous three
months the company
- has changed its name or shifted its registered office from one State to another
- has made a disposal for value of property or rights held by it, immediately
before cesser of trade or otherwise carrying on of business, for the purpose of
disposal for gain in the normal course of trading or otherwise carrying on of
business
- has engaged in any other activity except the one which is necessary or
expedient for the purpose of making an application under that section, or
 deciding whether to do so or concluding the affairs of the company, or
complying with any statutory requirement
- has made an application to the Tribunal for the sanctioning of a compromise
or arrangement and the matter has not been finally concluded, or
- is being wound up under Chapter XX, whether voluntarily or by the Tribunal
F. In case it is found that an application by a company under sub-section (2) of S248
has been made with the object of evading the liabilities of the company or with the
intention to deceive the creditors or to defraud any other persons. Then the
persons in charge of the management of the company shall, notwithstanding that
the company has been notified as dissolved, be jointly and severally liable to any
person or persons who had incurred loss or damage as a result of the company
being notified as dissolved; and also be punishable for fraud in the manner as
provided in section 447.
G. Where a company stands dissolved under S248, the company from the date
mentioned in the notice under S248(5), shall cease to operate as a company and
the Certificate of Incorporation issued to it shall be deemed to have been cancelled
from such date except for the purpose of realising the amount due to the company
and for the payment or discharge of the liabilities or obligations of the company.
14. Rectification of errors:
A. If there is any error, then the solution lies with the Appeal to the National
Company Law Tribunal.
B. S252 provides that any person aggrieved by an order of the Registrar, notifying a
company as dissolved under S248, may file an appeal to the Tribunal within a
period of three years from the date of the order of the Registrar.
C. If the Tribunal is of the opinion that the removal of the name of the company from
the register of companies is not justified, then it may order restoration of the name
of the company in the register of companies.
D. But before passing any order under this section, the Tribunal shall give a
reasonable opportunity of making representations and of being heard to the
Registrar, the company and all the persons concerned.
E. On the other hand, if the Registrar is satisfied, that the name of the company has
been struck off from the register of companies either inadvertently or on the basis
of incorrect information furnished by the company or its directors, which requires
restoration in the register of companies. Then the registrar may within a period of
three years from the date of passing of the order dissolving the company under
S248, file an application before the Tribunal seeking restoration of name of such
company.
F. After the decision given by the Tribunal, a copy of the order passed by the
Tribunal shall be filed by the company with the Registrar within thirty days from
the date of the order.
G. On receipt of the order the Registrar shall cause the name of the company to be
restored in the register of companies and shall issue a fresh certificate of
incorporation.
15. Rights of affected parties:
A. If a company, or any member or creditor or workman of that company thereof
feels aggrieved by the company having its name struck off from the register of
companies, then that person may appeal to the Tribunal
B. by an application, before the expiry of twenty years from the publication in the
Official Gazette of the notice under Section 248(5).
C. The person should establish that the company, at the time of its name being struck
off was carrying on business or was in operation or otherwise and it is just that the
name of the company be restored to the register of companies.
D. If the Tribunal is satisfied that the company was actually carrying on business or it
is otherwise just to do so, the Tribunal may order the name of the company to be
restored to the register of companies.
E. It may, by the order, give such other directions and make such provisions as
deemed just for placing the company and all other persons in the same position as
nearly as may be as if the name of the company had not been struck off from the
register of companies.
F. In Bhogilal v. Registrar of Joint Stock Companies:
- The creditor of a defunct company filed a petition for restoration of its name.
- The petitioner alleged that he had obtained a decree against the company a day
before the publication of the notification.
- The directors of the company on being asked by the Registrar misinformed
him that the company was not in operation.
- It was also found that the entire share capital of the company was not called up
and that the uncalled capital was sufficient to satisfy the decree.
- Held that it was just and equitable to restore the name of the company to the
register.
G. In Vijayawada Chamber of Commerce and Industry v. Registrar of Non-
Trading Companies:
- the company was actually functioning, only its returns had been delayed.
- The striking off the comp
- anies name was set aside.
- An income tax officer is a creditor for this purpose and can apply for
restoration.
H. The company which has been struck off may itself apply for restoration, though
the court would not order restoration unless there is sufficient evidence of likely
benefit to creditors or members.
I. Restoration operates retrospectively, means that on the restoration of a company
back to the register after its being struck off the consequence is as though it had
never been struck off the register.
J. The company will be deemed to have had its existence although.
K. Thus the provision relating to restoration "seems primarily intended for companies
which were active at the moment of their mortal wound". But discovery of
outstanding assets of the company is, of course, one of the reasons why restoration
is sought. This is why a period of twenty years is allowed.
 L. The company may have unknown assets which do not come to light until many
years after the company has been struck off and so dissolved

REVIVAL AND REHABILITATION OF SICK COMPANIES

1. S253(1): when a company fails to pay the amount on demand by the secured creditor,
which could be 50% or more which the company has acquired as debt, fails to pay the
full amount or the amount satisfying the secured creditor back within a period of 30
days from the notice given, then the secured creditor can file and application and
reach out to the tribunal in a prescribed manner along with the relevant facts and
evidences of the default of the payment by the company and if all these things are
checked and justified, so for a determination the company is declared as a sick
company.
2. S253(5): Even the central, state, Reserve Bank of India or any public or state level
financial institution or even a scheduled bank if have sufficient reasons to believe or
prove that a company has become a sick company, it could make a reference in
respect of such and such company to the tribunal for the determination of certain
measures which needs to be taken to be taken care of that.
3. The Tribunal has to decide within a period of 60 days that whether a company is sick
or not, provided the, the company shall be given a chance and a reasonable
opportunity to reply within a period of 30 days.
4. If the Tribunal is satisfied that a company has become a sick company, after reading
and considering all the facts of the case, it has to decide and give an order in writing
that whether the company would be able to make the repayments of its debts and
should give a reasonable amount of time for that.

Revival and rehabilitation

5. For revival and rehabilitation of a sick company, S254(1) of the companies act 2013
states that either the secured creditor or the sick company has to make an application
to the Tribunal for determination of the measures which are to be taken in order for
the revival and rehabilitation of such company.
6. In order to make the application for the revival and rehabilitation, the application shall
be accompanied by audited financial statements of the accounts of the company
relating to the previous financial year.
7. The required documents and drafts must be duly authenticated in a certain manner
along with the required fees as it would have been prescribed.
8. The application for the revival and rehabilitation of a sick company under S254(1)
must be made to the Tribunal within a period of 60 days from the day of declaration
of such company, as a sick company.
9. After the receipt of the application of revival and rehabilitation of a sick company, the
Tribunal must fix a date which must not be later than 90 days of the receipt of the
application for the hearing of the company.
10. An appointment of an interim administration is done in order to settle the disputes and
set a meeting with the creditors of the declared sick company under S253, and the
meeting must be held under 45 days of the order passed by the Tribunal on the
11. All the necessary drafts and required documents must be seen and carefully looked
upon and the interim administration has to submit a report to the Tribunal in respect to
the case within 60 days of the order passed by the Tribunal.
12. In case if no drafts have been submitted by the board of directors of the declared sick
company, the Tribunal may order the interim administration to take charge or control
over the management of the sick company and It issues certain other directions to the
interim administration in order to protect and preserve the assets of the sick company.
13. When the interim administration has been ordered to take over the control over the
management by the Tribunal of the declared sick company under S253, the
management and other staffs of the company are required to provide full support and
assistance to the interim administration in order to complete the process in a smooth
manner and to avoid any problem to be faced by the interim administration.
14. S257 mandates that a committee of creditors is to be made by the interim
administration consisting of not more than 7 members in order to represent each class
of the creditors,
15. A meeting is setup with the committee of creditors in which all the necessary
objectives are discussed with the committee of creditors.
16. After all these functions are completed and everything is done in a smooth and decent
manner
17. S258 states that the Tribunal has to fix a date on which the hearing on the matter of
the revival and rehabilitation of the sick company is to be done.
18. If the Tribunal is satisfied that the creditors representing three-fourths in value of the
amount outstanding against the sick company present and voting have resolved that
A. the company could not be revived and rehabilitated, the Tribunal records the
opinion of the creditors and orders the process of winding up of the company.
B. If the creditors decide that by adopting certain measures the sick company may be
revived and rehabilitated, the Tribunal appoints a company administration for the
company and orders it to prepare a scheme of revival and rehabilitation of the sick
company.