Winding up

Governing Provisions

The Companies Act, 2013

The Insolvency and
The Companies Act, Chapter XX: Bankruptcy Code, 2016:
1956- IN FORCE [Part
Part I(Winding up by Part I,
VII, Chapters I-V, Ss. 425-
Tribunal), Part II (Insolvency Resolution
560- & Liquidation for Corporate
Part II (Voluntary Winding
Compulsory Winding up, up), Persons inforce wef 30 Nov &
Voluntary Winding up, 09 Dec, 2016, 30 March, 2017),
Winding up under the Part III (provisions for every Part IV (Regulation of
supervision of the Court mode of winding up), Insolvency Professionals, IBBI,
(2002 Amendment- Part IV (official liquidator)- Agencies & Information
Utilities- 05 Aug-15 Nov,
Omitted, provision never 2016),
notified] NOT NOTIFIED TILL Part V [05 Aug-15 Nov, 2016]
IBC
 Meaning
 Pennington (Pennington's Company Law): “Winding up
or liquidation is the process by which the management of
company’s affairs is taken out of its directors’ hands , its
assets are realised by a liquidator, and its debts and liabilities
remaining is returned to its members or shareholders. At the
end of the winding up the company will have no assets or
liabilities , and it will therefore be simply a formal step for it
to be dissolved, that is, for its legal personality as a
corporation to be brought to an end.”

 Object of winding up:

a. Realize the assets; and
b. Pay debts (if any).
 Definition [S. 2(94A)]

 S. 255 r.w. XI Schedule, Insolvency and

Bankruptcy Code, 2016 [Amendments to the
Companies Act, 2013]- Enforced wef 15
November, 2016
 “Winding up” means winding up under this Act
or liquidation under the Insolvency and
Bankruptcy Code, 2016, as applicable
  First step- assets realized, liabilities paid off, surplus, if any,
Difference between Winding up distributed amongst members
 Liquidator/ Insolvency Professional: appointed by Tribunal or
Co.
 Liquidator/ Insolvency Professional: represents Co. in process
of winding up
Winding up
and Dissolution

 Creditors can prove their debts in the winding up process

 Cases can be filed against Co. while it is undergoing winding
up

 Final step: existence of Co. ceases

 Order of Dissolution: passed by Tribunal only
 Liquidator/ Insolvency Professional: can no longer
represent Co.
 Creditors can’t claim their debts after dissolution
Dissolution

order
 Case can’t be filed after the dissolution order
  Co. could not be declared Insolvent, even though
Difference between Winding up unable to pay debts [Presidency Town Insolvency
Act, 1909 & Provincial Insolvency Act, 1920]
 Co. can be wound up even though solvent
 Co. in winding up- assets vested in Co.,
administered by Liquidator/ insolvency Professional
and Insolvency

Winding up

 Consequence of winding up- Co. dissolved

 Individual or firm could be declared insolvent

 Individual declare insolvent only when he is
unable to pay debts or discharge liabilities
 Individual declared insolvent: assets vest with
Official Assignee/ Receiver
Insolvency

 Consequence of insolvency proceedings- insolvent

person discharged from his debts
  Property remains vested in Co. and administered
Difference between liquidation of by Liquidator/ Insolvency Professional
 Governed by CA, 2013 and IBC, 2016
Company and Individual

 Liquidator/ Insolvency Professional winds up

Co.’s affairs and Co. is ordered to be dissolved
Company

 Property doesn’t vest in individual, vests in

Bankruptcy Trustee
 Governed by IBC, 2016
 Insolvent person can obtain discharge & continue
living, free from debts
Individual
 Voluntary Winding up- Part II, Chapter V, S. 59,
Winding up IBC (wef 30 March, 2017)
[S. 270- Winding up by Tribunal (only); Ss.304-
323 CA: omitted]- wef 15 Nov, 2016

Winding up on ground of Inability to Pay Debts- Part

II, IBC- wef 30 Nov & 09 Dec, 2016

Winding up on other grounds- [S.255 & Schedule XI,

IBC, 2016 r.w. S. 271CA: substituted; earlier 07
grounds, currently 05 grounds]- wef 30 Nov+ 07& 09
Dec, 2016
 a. Inability to pay debts
Changes in S. 271 after S. 255 & b. Special resolution
c. Co. conduct against sovereignty etc
d. Failure of revival or rehabilitation of a sick company
Schedule XI of IBC

e. Co. conduct- fraudulent/ unlawful

f. Default in filing financial statements/ annual returns with
RoC
Before

g. Just and equitable

a. Special resolution
b. Co. conduct against sovereignty etc
c. Co. conduct- fraudulent/ unlawful
d. Default in filing financial statements/ annual
returns with RoC
e. Just and equitable
After
Compulsory winding up
 Grounds for Compulsory Winding
up [S.271]

Co. conduct against Co. conduct-

Special resolution
sovereignty etc fraudulent/ unlawful

Default in filing
financial statements/
Just and equitable
annual returns with
RoC
 Winding up by Special Resolution
[S.271(a)]
 May be for any cause; but Tribunal to be satisfied that
winding up is not opposed to public interest or
interest of co. as a whole
 Potency of financial revival to be assessed, if co.
experiencing loss and passes resolution
 Notice for meeting of shareholders to be
accompanied by explanatory statement reg grounds
for proposal of winding up
 Tribunal has discretion of accepting/ rejecting
resolution for winding up
 Company acting against the interests of
sovereignty and integrity of India, security of
state, friendly relations with foreign states,
public order, decency or morality [S.271(b)]
 Petition on this ground may be filed by CG/ SG
 Company’s affairs conducted in fraudulent
or unlawful manner, etc [S.271(c)]
 Registrar or any other person authorised by CG may file a petition for
winding up
 Grounds:
a. Affairs of co. are being conducted in fraudulent manner; or
b. Co. was formed for fraudulent or unlawful purpose; or
c. Persons concerned in formation of co. or management of its affairs
have been guilty of fraud, misfeasance or misconduct in
connection therewith
 Tribunal may order for investigation into affairs of co. similar to
grounds mentioned above [S.213(b)]
 Co. in default in filing financial statements/ annual
returns for immediately preceding 05 consecutive
financial years [S.271(d) ]
 Similar to disqualification of a director
 Just and Equitable [S.271(e)]
 Tribunal of the opinion that ground is just and
equitable- co. may be wound up
 Ejusdem generis not applicable
 Tribunal may give due weightage to interest of the
co., its employees, creditors and shareholders and the
interest of the public
 Relief on this ground is in nature of last resort, when
other remedies aren’t efficacious to protect interests
of the co.
 Wide and wise discretion of the tribunal
 Instances of Just and equitable
ground
1. Disappearance of substratum:
 Refers to main objects
 Abandonment of all objects/ none of the main objects achieved
(not some of them)- leads to loss of substratum
 Temporary difficulty not within the ambit of the ground
 Test to determine loss of substratum :
a. Where subject matter of company is gone; or
b. Object for which it was incorporated has substantially failed; or
c. It is impossible to carry on business of co. except at loss; or
d. Existing or probable assets are insufficient to meet the existing
liabilities.
 Contd.

2. Illegality of objects and fraud:

 Emphasis not only on fraud in conduct of
business, rather original object of creating the
company was fraudulent or illegal
3. Complete deadlock in management:
 Voting power at Board meetings or GM are
divided between 02 dissenting groups,
deadlock resolved by tribunal’s winding up
order
 Contd.

4. When the co. is a bubble

5. Oppression:
 Efficacious remedy under Ss. 241 & 242, co.
may not be wound up
 Who can make petition?
[S. 272]

Combination of
The company Contributory(ies) company &/or
contributory(ies)

Any person
CG/SG if case fall
The Registrar authorised by CG in
under S.271 (b)
this behalf
 • Role of directors in filing petition
The company • Approval of shareholders in GM by a special
resolution- required
[S.272(1)(a)] • Petition to be accompanied by statement of
affairs [S.272(4)]
 • S.2(26): person liable to contribute to assets of co. in the event of its
being wound up; includes a holder of fully paid up shares
• May petition in any of following capacities: original allottee or
Contributory’s securities held by him for at least 06 months out of 18 months
preceding commencement of winding up OR devolved upon him
petition through death of former holder
• Position of holder of fully paid up share
[S.272(1)(b)] • Position of holder of forfeited shares: petition within 01 year of

r.w. S. 272(2) forfeiture and minimum duration of holding as stated above

• Position of legal representative: deceased shareholder to be natural
person
• Contributory with call in arrear cannot file petition

Joint petition • Any combination of company and contributory

[S.272(1)(c)]
 • Petition on any ground under S.271(1) except clauses (a) & (e)
• May file on remaining grounds as follows: co.’s conduct against

The Registrar
sovereignty & integrity of India/security of state/ affecting friendly
relations with alien friends/ affecting public order, decency or morality;
fraudulent conduct/ unlawful purpose/ management guilty of fraud,
[S.272(1)(d)] misfeasance or conduct; default in filing annual return of fin. stat. for
immediately preceding 05 consecutive fin. yrs.
• Petition to be filed after sanction of CG; CG to approve after hearing
both parties; on approval petition to be filed

Person
authorised by • Any person may be authorised
CG [S.272(1)
(e)]
 • Report of inspectors to
investigate affairs of co. u/S.213
on just and equitable ground or
CG/SG when against national interest
petition that co. should be wound up
• Govt. may authorise any person
[S.272(1)(f) including Registrar
• May file petition on ground of
S.271(1)(b)
Position of workers’ union of a company

• National Textile Workers’ Union v. P R Ramakrishnan, [1983] 53 Comp. Cas. 184:

statutory right to file petition, thus, workers cannot file; but have a right appear be
heard in support of or against a petition for winding up depending on whether their
interests are likely to be affected by a winding up order
• Right of any other person to be heard?

Procedure for making and service of winding up petition

• If petition filed by person other than company, notice of petition to be sent to co. and
provide opportunity of being heard
• Copy of petition required to be served to every contributory or creditor
• Petition to be advertised in 01 daily newspaper in principal language of state at least
14 days before date of hearing
• Petition may be withdrawn subsequently with approval of Tribunal
Commencement of Winding up
Section 357
 Contd.

 Deemed to commence at the time of presentation

of petition of winding up
 If petition doesn’t culminate in winding up order,
the aforementioned item has no significance
Procedure for winding
up order
Petition
Provisional liquidator
Company liquidator
Removal and replacement of liquidator
Winding up committee
Powers of the tribunal
 Petition
 Presented to the tribunal
 Petition filed by co.- statement of affairs in prescribed form to
accompany petition
 Petition filed by person other than co.- tribunal will require co. to
file its objections along with statement of affairs within 30 days of
petition; tribunal to be satisfied with prima facie case for winding up,
before passing order [S.274(1)]; necessary documents to be
submitted to liquidator by directors and auditors[S.274(3)]
 Extension if circumstances justify- period to submit objections and
statement of affairs may be extended by another 30 days [Proviso to
S.274(1)]
 If objections and statement not filed as stipulated- co. will not be
allowed to oppose petition [S.274(2)]; default- every officer:
punishable with imprisonment extending up to 06 months and fine of
min. 25000 INR up to 05 lakh INR or with both [S.274(4)]
 Provisional liquidator
 May be appointed by tribunal after presentation of a
winding up petition and before making of winding
up order
 Tribunal to give notice to co. before such
appointment
 Powers same as liquidator, unless tribunal has
limited it
 Suits and Actions against co.- stayed; unless NCLT’s
approval to continue/commence proceedings
 Company liquidator
 Tribunal shall appoint company liquidator or liquidator
from amogst the Insolvency Professionals regd under
IBC (after 2016) [before 2016- panel maintained by CG
as company liquidator on winding up order]
 Provisional liquidator may be appointed as Company
Liquidator on winding up order by tribunal [S.276(7)]
 Panel [before 2016]: CA, CS, Cost accountants,
Advocates, other professionals, as may be prescribed-
not less than 10 yrs of experience in corporate matters
 Tribunal may appoint provisional liquidator as company
liquidator
 Contd.
 Remuneration: tribunal empowered to fix T&C &
remuneration to be paid to company liquidator or
provisional liquidator; fee based on task performed,
experience, qualification and size of co. [S.276(5)]
 Declaration: to be filed by provisional liquidator
or co. liquidator to tribunal within 07 days of
appointment disclosing any conflict of interest or
lack of independence wrt appointment; obligation
to continue throughout tenure of appointment
[S.276(6)]
 Removal and replacement of
liquidator [S. 276]
 Governs both provisional and co. liquidator
 Tribunal entitled to remove on grounds of misconduct, fraud or
misfeasance, professional incompetence or failure to exercise due
care and diligence in performance of powers and functions,
inability to act as provisional liquidator or as co. liquidator;
conflict of interest or lack of independence during term of
appointment
 Reasonable opportunity to be heard
 Death/resignation/ removal: tribunal may transfer work to
another liquidator
 Any loss caused to co. due to circumstances aforementioned-
tribunal may pass orders to recover form such provisional/ co.
liquidator, after giving reasonable opportunity of being heard
 Winding up committee [S.277(4)]
 Liquidator shall file an application to tribunal for constitution of
a winding up committee to assist and monitor progress of
liquidation
 Time: to be filed within 03 weeks from date of winding up order
 Tribunal attachments: co. shall have a nominee of secured
creditors, professional nominated by tribunal and official
liquidator attached to tribunal
 Convener: co. liquidator
 Composition of Winding up Committee:
a. Official Liquidator;
b. Nominee- secured creditors; and
c. Professional nominated by the Tribunal.
 Contd.
 Functions:
a. Taking over of assets;
b. Examination of statement of affairs;
c. Recovery of property- cash or any other assets of co. including benefits
derived therefrom;
d. Review of audit reports and accounts of co.;
e. Sale of assets;
f. Finalization of list of creditors and contributories;
g. Compromise/abandonment/ settlement of claims and payment of dividends;
and
h. Any other function as directed by tribunal
 Periodical report: monthly report+ minutes of meeting duly signed by
members present- to be placed by co. liquidator before tribunal [S.277(6)]; on
completion of winding up- co. liquidator to prepare draft final report, get it
approved by winding up committee as final report [S.277(7)]; final report to be
submitted by co. liquidator to tribunal before passing of dissolution order
[S.277(8)]
 Powers of the tribunal [S.273]
 On receipt of winding up petition, tribunal may:
a. Dismiss it, with or without costs; or
b. Appoint provisional liquidator;
c. Pass interim order as it deems fit; or
d. Pass order of winding up, with or without costs; or
e. Pass any order as it deems fit.
 Tribunal may consider concerns of contributory(ies) and/or
creditor(s) of co. on ground of sufficient evidence; may direct
convening of their meetings, or be conducted as directed by tribunal
[S.354]
 Appointment of chairman: by tribunal, for meetings, if any,
chairman to report outcome of meeting to tribunal
 Consequences of
Winding up Order
Intimation by NCLT To Provisional Liquidator/ Company Liquidator & RoC [S.277(1)]
• Within 07 days of winding up order

RoC’s responsibility
• Endorsement in Co’s records
• Notification In Official Gazette
• Listed Co.s: Stock Exchange(s), wherever listed

Notice of discharge
[S. 277(3)]
• Deemed notice
• Offrs. And employees
• Exception: business continued for beneficial winding up
 Contd.
Stay on suits [S.279]
• Suits and Actions by or against co.- stayed; unless NCLT’s approval to continue/commence
proceedings
• Application of leave: to be disposed of by the NCLT within 60 days
• Exception: cases on appeal pending before SC/HC

Binding effect of
order
• All creditors
• All contributories
• Irrespective of who asked for it

Jurisdiction of NCLT
[S. 280]
• Entertain or dispose: any suit/ proceeding/claim by or against the co.;
appln. u/S.233 (M&A); any matter related to the co.
• Existing matters/fresh matters
 Contd.
Custody of Co.’s
Property [S.283]
• Winding up order/appointment of provisional liquidator
• Deemed custody of property, effects & actionable claims
• Preservation & Protection of property
• Contributory/Trustee/Receiver/Banker/Agent/ officer/other employee: pay, deliver, surrender, transfer money,
property or books and papers to Liquidator

Interpretation of
Limitation [S.358]
• From the date of commencement of winding up to one year from date of winding up order:
excluded from limitation period
• In favour of the company

Validity of property
disposition [S. 334]
• With reference to commencement of winding up: disposition of property , including
actionable claims; transfer of shares in the co.; alteration in status of members- VOID
• Unless with sanction of NCLT
 Contd.
Validity of other actions
[S.335]
• Commencement of Winding up
• Attachment/Distress/Execution/Sale put in force without leave of NCLT
• Estate/effects of co.
• VOID
• Exception: recovery of tax/impost/dues payable to govt.

Floating charge
[S.332]
• Covered previously

Books of account
[S.274(3)]
• Directors/offrs- within 30 days of winding up order- completed and audited
books of account to the liquidator
 Submission of Report by Company Liquidator-
within 60 days of winding up order [S.281(1)]

Contribut-
Guarantee ories & Trade-
extended by dues marks &
co. IP Contracts,
Debts due JV &
to co. collaborati-
ons

Liabilities Holding &

existing/ subsidiary
contingent co.

Cases by &
Capital against the
co.

Assets
S. Any other
info acc to
281 NCLT
 Contd.
Steps for
maximizing value of
assets

Manner of formation
and incorporation of
Viability of business
co.- any fraud
of co.
committed by
promoter

Other
matters
 Cont.
 Inspection of report: creditor/ contributory or their
agents
 Direction of tribunal on report:
a. Fix time limit, may later revise time limit
b. Sell company as going concern or its property
c. Investigation u/S.210 or direct the liq. to file
criminal complaint against persons involved in the
fraud
d. Protect assets
e. Other orders
 Powers of Liquidator S. 290(1)
Deal and sell
Carry on business Execute documents
property
• To do all things • Deeds, receipts, • Movable &
necessary for other documents immovable
beneficial winding • In the name and property/
up on behalf of the actionable claims
• Carry on business co. • Public auction/
acc to MoA private contract
• He can sell the
assets of co. as
going concern
 Contd.
Institute or
Settle claims Inspect records
defend suit
• On behalf of the • Invite and settle • Records and
company claims returns
• Creditors, • RoC or any
employees & other authority
others
• Distribute sale
proceeds acc to
Companies Act,
2013
 Contd.

Take professional Disclaim onerous

Call meetings
assistance property
• To discharge his • With permission • Creditors or
duties of the tribunal contributories
• Protect assets of • As he deems fit
co. OR on requisition
(by 1/10th in value
of resolution
creditors/
contributories)
 Duties of Liquidator
Submission of preliminary Take custody of
report (S.281) company’s property
(S.283)

Periodical reports to tribunal

Audit of accounts (S.294): account for receipt
and payment twice a year to trib; duly verified (S.288)
declaration before submission; audited copies • Quarterly report on progress of
to be submitted to trib;
winding up
Audited copy of RoC open for inspection and • On appln. by co. liq.- tribunal may
sent by post to creditor and contributory; govt
co- to CG/SG review/modify order

Maintain Books (S.293): Report in case of fraud:

including entries/minutes of formation and incorporation
meetings of a co.
 Advisory Committee (S.287)

Members: Co. liq. shall

Appointment: trib may convene meeting of
appoint @ winding up Object: advise co. liq. & creditors &
order; not more than 12 report trib on specified contributories in 30 days
members; proportion matters from winding up order to
determined by trib help trib constitute the
committee
 Contd.

Right to inspect: books

of account,
Meeting: chaired by
documents, assets,
co. liq.
properties of co. At
reasonable time
 Disclaimer of Onerous
Property (S.333)
a. Land of any tenure,
burdened with onerous
covenants
Onerous property: b. Partly paid up shares or
Onerous: burdensome or
property that has ceased to stock in a co.
contracts with heavy
be an asset and has
obligations c. Unsaleable property;
become a liability
due to obligations attached
to it
d. Unprofitable contracts
 Contd.
Disclaim onerous
property within 12
months from
Requirement of valid Discretionary powers commencement of
disclaimer: written & of trib to grant or winding up or such
signed by co. liq., refuse; notice issued to period stipulated by
permission of trib interested parties trib; if such property
discovered after a
month, 12 months to
be applicable from then
 Contd.
Appln. by
interested party to Affected person
liq. On whether he may apply to trib
Co. relieved of all
will disclaim for damages for
liabilities wrt the
property- liq. to breach of contract,
property
give notice within he is deemed to be
28 days; trib may creditor of the co.
extend period
 Contributories
 Who are contributories?
 Definition u/S.2 (26)
 Present members of a limited liability co.: unpaid amount on
shares
 Past members: ceased to be member within 01 year before
commencement of winding up
 Present/past director with unlimited liability: sanction of
tribunal; cessation within 01 year before commencement of
winding up
 Legal representative of deceased member
 Assignee of a contributory, if he is judged insolvent
 Subscribers to MoA, even though their names are not entered in
register of members
 Liabilities of Contributories
(S.285)
 Two lists: List A & List B
 List A: present members with names in register of
members on date of commencement of winding up
 List B: past members; ceased within 01 year of
commencement of winding up
 List of Contributories: settled by tribunal on
winding up order; may dispense with it if
unnecessary to make calls/adjust rights of
contributories
 Contd.

 Liabilities of List A contributories:

 Liable to contribute: co. assets insufficient for
debts, liabilities and expenses of winding up-
order by the tribunal
 Co. limited by shares: unpaid amount on
shares
 Co. limited by guarantee: the amount
guaranteed
 Contd.
 Liabilities of List B contributories:
 Secondary liability
 Circumstances for consideration
 Ceased to be a member within 01 year from
commencement of winding up
 Debt contracted by a co. when he was a
member
 Present members unable to satisfy the
contribution required by them
 Contributories: Set off (S.295)
 Member also a creditor: cannot set-off
 Exceptions:
a. Unlimited co.: on tribunal’s order; on account of
independent dealing or contract between company and
contributories
b. Limited co.: on tribunal’s order; amount due to
Manager/Director with unlimited liability on account of
independent contract between co. and Manager/Director
c. All companies: contributories are allowed to set off
against subsequent call when all creditors are paid in full
 Contributories: Calls (S.296)

 Tribunal may make calls: after winding up order

and ascertainment of assets
 Call may be made on all/ any contributory to the
extent of their liability
 Purpose of call: satisfy debts an liabilities of co.,
cost, charges and expenses of winding up
 Dissolution (S.303)

 Appln by liq to trib: affairs of co. wound up

 Opinion of the trib: just and reasonable
 Co. dissolved from date of dissolution order
 Copy of order to be filed by liq to RoC within 30
days of order
 No suit/proceeding to lie against the company on
dissolution order
 Powers of Tribunal: Revival
(S.356)
 Declaration of dissolution by trib to be void on
ground of fraudulent winding up proceedings
 Power of tribunal: discretionary
 Application: Liq or any interested person
 Application within 02 years from date of
dissolution of company
 Copy of cancellation order to be filed with RoC
within 30 days of order
 Overriding Preferential Payments &
Preferential Payments (Ss. 326 & 327)
Overriding
Cost & expenses of Preferential debts
preferential
winding up u/S.327
payment (S.326)

Preference Payment due under

Unsecured creditors
shareholders floating charge

Equity shareholders
 Priority in preferential payments
(S.326)
 In priority- over all other debts
1. Workmen's dues (all wages, salary, commission,
compensation under Industrial Disputes Act, accrued
holiday remuneration, provident fund, gratuity fund,
etc.);
2. Secured creditors (for debts that could not be realized
or amount of workmen’s portion in his security-
whichever is less; pari passu with workmen’s dues)
 Paid in full
 Assets insufficient- divided in equal proportions
 Preferential payments
(S. 327)
 Preferential payments- subject to S. 326
1. Govt. dues: revenue, taxes, cess due to
government, local authority- amount to be due and
payable within 12 months from date of
commencement of winding up
2. Wages, Salary, Bonus of Employee: services
rendered to co. due for a period not exceeding 04
months within 12 months within 12 months from
date of commencement of winding up; amount not
to exceed limit notified by CG for one claimant
 Contd.

3. Accrued holiday remuneration payable to employee

4. All amount payable within 12 months from date of
commencement of winding up under ESI or any
other law
5. Workmen’s compensation under Employees’
Compensation Act, 1923
6. All sums due from provident fund, pension fund,
gratuity etc
7. Expenses of investigation
 Fraudulent preference
(Ss. 328-332)
 Bias in favour of select creditors
 Essentials:
1. Transaction within 06 months before date of
commencement of winding up
2. Motive of transaction: prefer one creditor in
preference to other creditors
3. Voluntary act of transfer of property, money,
delivery of goods, etc
 Consequence of fraudulent
preference
 Transfer of movable/immovable property or
delivery of goods by co. within 12 months from
date of commencement of winding up- void
against the co. liq. (S.329)
 Exceptions:
1. Transaction in ordinary course of business
2. Transaction with purchaser/ charge holder in
good faith and for consideration
 Contd.

 Liability for fraudulent preferences (S. 330):

personal liability as surety for debts; any transfer/
assignment of all its property to trustees for
benefit of all its creditors- void; restitution by
such creditors
 Effect of floating charge (S. 332)
 Liabilities under winding up
 Liability where proper accounts not kept (S.338):
through immediately preceding 02 years form the
date of winding up- every offr in default liable for
punishment

 Liability for fraudulent conduct of business

(S.339): intent to defraud creditors/ persons/
fraudulent purpose- appln by liq/creditor/contributory
to trib- such persons personally liable for debts of the
co.- punishment under S. 447
 Contd.

 Liability for misfeasance proceedings or action against

delinquent officer (S. 340): during course of winding up-
promotion, formation or incorporation of co./ past or present
directors/ co. liq- misapplied or retained co. property/guilty
of misfeasance- appln by co. liq./creditor/ contributory

 Liability of director for misfeasance: action of

misfeasance against deceased director- liability on assets
with legal representative- liability of directors are joint and
several- directors resident abroad with assets in India, decree
enforceable in India
 Disposal of books and papers of
Company (S.347)
 Tribunal’s orders
 Co./Co. liq./ any other person: not liable after 05
years from dissolution
 Destruction of books and papers: CG Rules
 Winding up of Unregistered
Company (Ss. 375-378)
 Partnership/ association of persons- more than 07
persons
 Excludes railway co., regd. co., illegal
association
 Foreign co. can be wound up as an unregd. co.;
including place of business
 Circumstances: ceased to carry on business;
unable to pay debts; just and equitable
 Contd.
 Inability to pay debts:

1. Notice by creditor- debt of 01 lac or more- failure to

pay/secure within 03 months of demand
2. Institution of suit/legal proceeding by member after serving
due notice- failure to pay/secure within 10 days
3. Execution of court decree/ order of court/ tribunal returned
unsatisfied in whole or in part

 Procedure: jurisdiction-deemed to be regd in state of principal

business; provisions of compulsory winding up aplicable
 Summary procedure for liquidation
(S.361)
 Eligibility of co. for summary procedure:
a. Assets of book value not exceeding 01 crore rupees; and
b. Such class/classes as may be prescribed.
 Summary liquidation: CG order only
 Appointment of Official Liquidator as Liquidator of such co.
 Official Liquidator: custody/ control of all assets, effects,
actionable claims- co. entitled/ seems to be entitled
 Report: within 30 days reg any possible fraud in
promotion/formation/management of affairs of co.; CG may
further order for investigation in such matters
 CG may order for Summary liquidation under Part IV or Part I
 Contd.

 Sale of assets & recovery of debts due to co.

[S.362]:
a. expeditious disposal of assets within 60 days
of appointment;
b. notice to contributories/ debtors within 30
days of appointment to deposit dues to the liq
within 30 days;
c. failure of payment: on an appln. CG may pass
appropriate orders
 Contd.
 Settlement of claims of creditors [S.363]:
a. Creditors: within 30 days of appointment liq to call upon
creditors to prove their claims; within 30 days of receipt of
call
b. List of claims: to be prepared by liq; acceptance/ rejection of
claim to be communicated with reasons in writing
 Appeal by creditors [S.364]:
a. CG: within 30 days of decision
b. Dismiss/appeal/modify decision on basis of report from liq
c. Payment by liq to creditors with settled claims
d. CG may refer matter to trib, if necessary, for necessary orders
 Contd.

 Order of dissolution [S.365]:

a. Final report by liqon winding up
b. CG (if no ref to trib); CG & Trib (if reference
made)
c. CG/Trib may pass dissolution order
d. RoC to strike off name, publish notification