Winding up of Companies – Part-1

Winding up of
Companies – Part-1
CS Meenakshi Jayaraman

2
Credits and Acknowledgments
Sundar Rajan S

3
Legends used in the Presentation
Act Companies Act, 2013
CG Central Government
NCLAT National Company Law Appellate Tribunal
NCLT National Company Law Tribunal
Rule Companies (Winding Up) Rules, 2020
Sec(s) Section(s)
SG State Government
Tribunal National Company Law Tribunal

Presentation Schema
Overview
Circumstances in
which Company
May be wound up
by Tribunal
Petition for Winding
Up
Powers of Tribunal
Directions for Filing
Statement of Affairs
Company
Liquidators and
Their Appointments
Removal and
Replacement of
Liquidator
Intimation to
Liquidator and
Registrar
Effect of Winding
Up Order and stay
of suits
Submission of
Report by Company
Liquidator
Directions of
Tribunal on Report
of Company
Liquidator
Custody of
Company's
Properties
Promoters,
Directors, etc., to
Cooperate with
Company
Liquidator
Settlement of List of
Contributories and
Application of
Assets
Judicial Precedents
4

Overview
• Winding up of a Company is the process through which life of a Company comes to an end
• The main purpose of winding up is to realize the assets and make the payments of Company’s debts fairly
• Winding up is the process by which management of a Company’s affairs is taken out of its directors, its
assets are realized by a liquidator and its debts are discharged out of proceeds of realization
• Winding up is classified into two types:
• Compulsory Winding up
• Voluntary Winding up
• Provisions of winding up are dealt with under Chapter XX of the Companies Act, 2013 read with Companies
(Winding Up) Rules, 2020
• Rules will be implemented with effect from 1st April, 2020 (i.e. the Rules are yet to be notified)
5

Circumstances in Which Company May be Wound Up
by Tribunal – Sec 271
(a) the Company has, by special resolution, resolved that the Company be wound up by the Tribunal
(b) the Company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly
relations with foreign States, public order, decency or morality
(c) on an application made by the Registrar or any other person authorised by the Central Government by notification under
this Act, the Tribunal is of the opinion that
•the affairs of the Company have been conducted in a fraudulent manner or
•the Company was formed for fraudulent and unlawful purpose or
•the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct
in connection therewith and that it is proper that the Company be wound up
(d) the Company has made a default in filing with the Registrar its financial statements or annual returns for immediately
preceding five consecutive financial years
(e) the Tribunal is of the opinion that it is just and equitable that the Company should be wound up
6
A Company may, on a petition under Sec 272, be wound up by the Tribunal, if

Petition for Winding Up – Sec 272
7
A petition to the Tribunal for the winding up of a Company shall be presented by,
a. The
Company
b. Any
contributory or
contributories
c. All or any of the
persons specified
in a and b
d. The Registrar
e. Any person
authorised by CG in
that behalf
f. CG or SG in case
Company is wound up
under Sec 271 (b)
A contributory shall be entitled to present a petition for the winding up of a Company,
notwithstanding that he may be the holder of fully paid-up shares, or that the Company
may have no assets at all or may have no surplus assets left for distribution among the
shareholders after the satisfaction of its liabilities,
and shares in respect of which he is a contributory or some of them were either originally
allotted to him or have been held by him,
and registered in his name, for at least 6 months during the 18 months immediately before
the commencement of the winding up or have devolved on him through the death of a
former holder

Contd.
Petition for winding up of a Company shall be presented in Form WIN 1 or Form WIN 2, as
the case may be, with such variations as the circumstances may require, and shall be presented
in triplicate
Every petition shall be verified by an affidavit made by the petitioner(s) in Form WIN 3
8
Form WIN 1 is applicable in case of winding up under Sec 271(b) to (e) whereas
Form WIN 2 is applicable in case of winding up under Sec 271(a)
Rule 3

Contd.
The Registrar shall be entitled to present a petition for winding up under Sec 271, except on the grounds specified in
Sec 271(a)
However, the Registrar shall obtain the previous sanction of CG to the presentation of a petition
CG shall not accord its sanction unless the Company has been given a reasonable opportunity of making
representations
A petition presented by the Company for winding up before the Tribunal shall be admitted only if accompanied by a
statement of affairs in such form and in such manner as may be prescribed
A copy of the petition made under this Sec shall also be filed with the Registrar and the Registrar shall, without
prejudice to any other provisions, submit his views to the Tribunal within 60 days of receipt of such petition
9
Statement of Affairs shall be in Form WIN 4 and shall contain information up to the date which shall not be more than 30 days
prior to the date of filling the petition or filling the objection as applicable and the statement of affairs shall
be made in duplicate, duly verified by an affidavit of concurrence of the statement of affairs in Form WIN 5
Rule 4

Powers of Tribunal – Sec 273
The Tribunal may, on receipt of a petition for winding up under Sec 272 pass any of the following orders, namely
•(a) dismiss it, with or without costs
•(b) make any interim order as it thinks fit
•(c) appoint a provisional liquidator of the Company till the making of a winding up order
•(d) make an order for the winding up of the Company with or without costs; or
•(e) any other order as it thinks fit
An order under Sec 273(1) shall be made within 90 days from the date of presentation of the petition
Before appointing a provisional liquidator under clause (c) as stated above, the Tribunal shall give notice to the Company and afford
a reasonable opportunity to it to make its representations, if any, unless for special reasons to be recorded in writing, the Tribunal
thinks fit to dispense with such notice
Tribunal shall not refuse to make a winding up order on the ground only that the assets of the Company have been mortgaged for an
amount equal to or in excess of those assets, or that the Company has no assets
Where a petition is presented on the ground that it is just and equitable that the Company should be wound up, the Tribunal may
refuse to make an order of winding up, if it is of the opinion that some other remedy is available to the petitioners and that they are
acting unreasonably in seeking to have the Company wound up instead of pursuing the other remedy
10

Directions for Filing Statement of Affairs – Sec 274
Where a petition for winding up is filed before the Tribunal by any person other than the Company, the Tribunal shall, if
satisfied that a prima facie case for winding up of the Company is made out, by an order direct the Company to file its
objections along with a statement of its affairs within 30 days of the order in Form WIN 4 along with an affidavit of
concurrence of the statement of affairs in Form WIN 5
Tribunal may allow a further period of 30 days in a situation of contingency or special circumstances and may direct the
petitioner to deposit such security for costs as it may consider reasonable as a precondition to issue directions to the
Company
A Company, which fails to file the statement of affairs as stated above, shall forfeit the right to oppose the petition and such
directors and officers of the Company as found responsible for such non-compliance, shall be liable for punishment under
Sec 274(4)
The directors and other officers of the Company, in respect of which an order for winding up is passed by the Tribunal
under Sec 273(1)(d), shall, within a period of 30 days of such order, submit, at the cost of the Company, the books of
account of the Company completed and audited up to the date of the order, to such liquidator and in the manner specified by
the Tribunal
If any director or officer of the Company contravenes the provisions of this Sec, the director or the officer of the Company
who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine amounting to
Rs. 25,000 to Rs. 5 lakhs, or with both – Sec 274 (4)
The complaint may be filed in this behalf before the Special Court by Registrar, provisional liquidator, Company Liquidator or
any person authorised by the Tribunal
11

Company Liquidators and Their Appointments –
Sec 275
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 as specified under Sec 275(2) of the
Act as the Company Liquidator
Sec 275(2)
The provisional liquidator or the Company Liquidator, as the case may, shall be appointed by the
Tribunal from amongst the insolvency professionals registered under the Insolvency and Bankruptcy
Code (IBC), 2016

Contd.
Where a provisional liquidator is appointed by the Tribunal, the Tribunal may limit and restrict his/her powers by the order
appointing him/her or it or by a subsequent order, but otherwise he/she shall have the same powers as a liquidator – Sec
275(3) of the Act
The terms and conditions of appointment of a provisional liquidator or Company Liquidator and the fee payable to him/her 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 – Sec 275(5) of the Act
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 – Sec 275(6) of the Act
While passing a winding up order, the Tribunal may appoint a provisional liquidator, if any, appointed under Sec
273(1)(c), as the Company Liquidator for the conduct of the proceedings for the winding up of the Company – Sec 275(7) of the
Act

Removal and Replacement of Liquidator – Sec 276
The Tribunal may, on a reasonable cause being shown and for reasons to be recorded in writing, remove the provisional liquidator or the
Company Liquidator, as the case may be, as liquidator of the Company on any of the following grounds, namely:
•Misconduct
•fraud or misfeasance
•professional incompetence or failure to exercise due care and diligence in performance of the powers and functions
•inability to act as provisional liquidator or as the case may be, Company Liquidator
•conflict of interest or lack of independence during the term of his appointment that would justify removal
In the event of death, resignation or removal of the provisional liquidator or as the case may be, Company Liquidator, the Tribunal may
transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing
Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage to the Company due to fraud or
misfeasance or failure to exercise due care and diligence in the performance of his or its powers and functions, the Tribunal may recover or
cause to be recovered such loss or damage from the liquidator and pass such other orders as it may think fit
Tribunal shall, before passing any order under this Sec, provide a reasonable opportunity of being heard to the provisional liquidator or, as
the case may be, Company Liquidator
14

Intimation to Company Liquidator, Provisional
Liquidator and Registrar – Sec 277
Where the Tribunal makes an order for appointment of provisional liquidator or for the winding up of a Company, it shall, within
a period not exceeding seven days from the date of passing of the order, cause intimation thereof to be sent to the Company
Liquidator or provisional liquidator, as the case may be, and the Registrar
On receipt of the copy of order of appointment of provisional liquidator or winding up order, the Registrar shall make an
endorsement to that effect in his records relating to the Company and notify in the Official Gazette that such an order has been
made and in the case of a listed Company, the Registrar shall intimate about such appointment or order, as the case may be,
to the stock exchange or exchanges where the securities of the Company are listed
The winding up order shall be deemed to be a notice of discharge to the officers, employees and workmen of the Company,
except when the business of the Company is continued
Within 3 weeks from the date of passing of winding up order, the Company Liquidator shall make an application to the Tribunal
for constitution of a winding up committee to assist and monitor the progress of liquidation proceedings by the Company
Liquidator in carrying out the function as provided in sub-Sec (5) [discussed in subsequent slide] and such winding up
committee shall comprise of the following persons, namely:
•Official Liquidator attached to the Tribunal
•nominee of secured creditors; and
•a professional nominated by the Tribunal
15

Contd.
16
The Company Liquidator shall be the convener of the meetings of the winding up committee which shall assist and monitor the
liquidation proceedings in following areas of liquidation functions, namely:
taking over assets and
examination of the statement
of affairs
recovery of property, cash or any
other assets of the Company
including benefits derived there from
review of audit reports and
accounts of the Company
sale of assets
finalisation of list of creditors
and contributories
compromise, abandonment and
settlement of claims
payment of dividends, if any;
and
any other function, as the
Tribunal may direct from
time to time
Company Liquidator shall place before the Tribunal a report along with minutes of the meetings of the committee on monthly basis duly signed
by the members present in the meeting for consideration till the final report for dissolution of the Company is submitted before the Tribunal
The Company Liquidator shall prepare the draft final report for consideration and approval of the winding up committee
The final report so approved by the winding up committee shall be submitted by the Company Liquidator before the Tribunal for passing of a
dissolution order in respect of the Company

Contd.
Notice of the application for appointment of provisional liquidator as specified under Sec 273
shall be in Form WIN 7
Order appointing the provisional liquidator under Sec 275(3) shall be in Form WIN 8, with
such variations as may be necessary
Intimation to the Company Liquidator or provisional liquidator under Sec 277(1) shall be in
Form WIN 9 and shall be sent by registered post or by speed post or by courier service or by
electronic means
Declaration to be filed by provisional liquidator or the Company Liquidator under Sec 275(6)
shall be in Form WIN 10
17
Rule 14 – Appointment of provisional liquidator or Company Liquidator

Contd.
18
Rule 17 – Order to be sent to liquidator and form of order
Order for winding up under Sec 277(1) shall be in Form WIN 11 with such variations as
may be necessary
Order for winding-up shall be sent by the Registrar* to the Company Liquidator and the
Registrar of Companies in Form WIN 12 and Form WIN 13 respectively
A copy of the order made by the Tribunal shall also be filed by the liquidator within 30 days
of the receipt with the Registrar of Companies in form INC-28
* Registrar means the Registrar of the NCLT or NCLAT and includes such other officer of the Tribunal or
Bench thereof to whom the powers and functions of the Registrar are assigned

Effect of Winding Up Order and stay of suits
19
The order for the winding up of a Company shall operate in favour of all the creditors and all contributories of the Company as if
it had been made out on the joint petition of creditors and contributories – Sec 278
When a winding up order has been
passed or a provisional liquidator
has been appointed,
no suit or other legal proceeding
shall be commenced, or if pending
at the date of the winding up order,
shall be proceeded with, by or
against the Company,
except with the leave of the
Tribunal and subject to such terms
as the Tribunal may impose
Any application to the Tribunal seeking leave under this Sec shall be disposed of by the Tribunal within 60 days
Sec 279
The above provision shall not apply to any proceeding pending in appeal before the Supreme Court or a High Court
Sec 278

Submission of Report by Company Liquidator – Sec 281
Nature and details of the assets of
the Company including their
location and value, stating
separately cash in hand and bank,
if any, and negotiable securities, if
any, held by the Company*
amount of capital issued,
subscribed and paid-up
existing and contingent liabilities
of the Company including names,
addresses and occupations of its
creditors
debts due to the Company and the
names, addresses and
occupations of the persons from
whom they are due and the
amount likely to be realised on
account thereof
guarantees, if any, extended by
the Company
list of contributories and dues, if
any, payable by them and details
of any unpaid call
details of trade marks and
intellectual properties, if any,
owned by the Company
details of subsisting contracts,
joint ventures and collaborations,
if any
details of holding and subsidiary
companies, if any
details of legal cases filed by or
against the Company
any other information which the
Tribunal may direct or the
Company Liquidator may consider
necessary to include
20
Where the Tribunal has made a winding up order or appointed a Company Liquidator, such liquidator shall, within 60
days from the order, submit to the Tribunal, a report containing the following particulars:
* Provided that the valuation of the assets shall be obtained from registered valuers for this purpose

Contd.
The Company Liquidator shall include in his report 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
The Company Liquidator shall also make a report on the viability of the business of the Company or the steps
which, in his opinion, are necessary for maximising the value of the assets of the Company
The Company Liquidator may also, if he thinks fit, make any further report or reports
Any person describing himself in writing to be a creditor or a contributory of the Company shall be entitled by himself
or by his agent at all reasonable times to inspect the report submitted in accordance with this Sec and take copies
thereof or extracts there from on payment of the prescribed fee
21

Contd.
The report to be submitted by the Company Liquidator under Sec 281 (1) shall be in Form WIN 16 with such
variations as may be necessary
The Tribunal shall, within seven days from the receipt of such report, fix a date for the consideration thereof
by the Tribunal and notify the date on the notice board of the Tribunal and to the Company Liquidator
22
Every creditor or contributory, by himself, or by his agent, shall be entitled to inspect
the statement of affairs submitted under Sec 272 (4) or Sec 274 (1) and the report of the
Company Liquidator submitted under Sec 281 (1),
on payment of a fee of Rs. 1,000 and to obtain copies thereof or extracts there
from on payment of a fee of Rs. 5 per page
Rule 25
Rule 26

Directions of Tribunal on Report of Company Liquidator
– Sec 282
23
Tribunal shall, on consideration of the report of the Company Liquidator, fix a time limit
within which the entire proceedings shall be completed and the Company be dissolved
Tribunal may, if it is of the opinion, at
any stage of the proceedings, or on
examination of the reports submitted
to it by the Company Liquidator
and after hearing the Company
Liquidator, creditors or contributories
or any other interested person, that it
will not be advantageous or
economical to continue the
proceedings,
revise the time limit within which the
entire proceedings shall be
completed and the Company be
dissolved
Tribunal may, on examination of the reports submitted to it by the Company Liquidator and after hearing the Company Liquidator,
creditors or contributories or any other interested person, order sale of the Company as a going concern or its assets or part thereof
Tribunal may, where it considers fit, appoint a sale committee comprising such creditors, promoters and officers of
the Company as the Tribunal may decide to assist the Company Liquidator in sale under this provision
Where a report is received from
the Company Liquidator or CG
or any person that a fraud has
been committed in respect of
the Company,
the Tribunal shall, without
prejudice to the process of
winding up, order for
investigation under Sec 210,
and on consideration of the
report of such investigation it
may pass order and give
directions under Sec(s) 339 to
342 or
direct the Company Liquidator
to file a criminal complaint
against persons who were
involved in the commission of
fraud
Tribunal may pass such other order or give such other directions as it considers fit
Tribunal may order for taking such steps and measures, as may be necessary, to protect, preserve or enhance the value of the assets of the Company

Custody of Company's Properties – Sec 283
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
24
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
custody or control all
property, effects and
actionable claims to which
Company is or appears to
be entitled to, and
take such steps and
measures, as may be
necessary, to protect and
preserve the properties of
the Company
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

Promoters, Directors, etc., to Cooperate with Company
Liquidator – Sec 284
The promoters, directors, officers and employees, who are or have been in employment of the Company or acting or
associated with the Company shall extend full cooperation to the Company Liquidator in discharge of his functions and duties
Where any person, without reasonable cause, fails to discharge his obligations as stated above, shall be punishable with
imprisonment which may extend to 6 months or with fine which may extend to Rs. 50,000, or with both
25

Settlement of List of Contributories and Application of
Assets – Sec 285
After passing of a winding up order by the Tribunal, it shall settle a list of contributories, cause rectification of
register of members in all cases where rectification is required in pursuance of this Act and shall cause the
assets of the Company to be applied for the discharge of its liability
Where it appears to the Tribunal that it would not be necessary to make calls on or adjust the rights of
contributories, the Tribunal may dispense with the settlement of a list of contributories
In settling the list of contributories, the Tribunal shall distinguish between those who are contributories in their
own right and those who are contributories as being representatives of, or liable for the debts of others
26

Contd.
While settling the list of contributories, the Tribunal shall include every person, who is or has been a member, who
shall be liable to contribute to the assets of the Company an amount sufficient for payment of the debts and
liabilities and the costs, charges and expenses of winding up, and for the adjustment of the rights of the
contributories among themselves, subject to the following conditions, namely:
• a person who has been a member shall not be liable to contribute if he has ceased to be a member for the
preceding one year or more before the commencement of the winding up
• a person who has been a member shall not be liable to contribute in respect of any debt or liability of the
Company contracted after he ceased to be a member
• no person who has been a member shall be liable to contribute unless it appears to the Tribunal that the
present members are unable to satisfy the contributions required to be made by them in pursuance of this Act
• in the case of a Company limited by shares, no contribution shall be required from any person, who is or has
been a member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such
member
• in the case of a Company limited by guarantee, no contribution shall be required from any person, who is or has
been a member exceeding the amount undertaken to be contributed by him to the assets of the Company in the
event of its being wound up but if the Company has a share capital, such member shall be liable to contribute to
the extent of any sum unpaid on any shares held by him as if the Company were a Company limited by shares
27

Judicial Precedents
28
J.B. Diamonds Ltd., In re S.J. KATHAWALLA, J. – [2019] 110 taxmann.com 387 (Bombay)
Hence, it was held that the order passed by Small Causes Courts in favour of tenants were nullity in eyes of law and tenants were directed
to handover physical possession of properties
It was also noted that said tenants had failed to provide any agreement to establish their tenancy. Further, there were gross collusion
between ex-directors of Company-in-liquidation and directors/partners of tenants
It was noted that said orders have been passed by Small Cause Courts after order for winding up of Company was passed. Further, Small
Cause Court which passed orders did not possesses requisite jurisdiction over Company-in-Liquidation and thus, order obtained by tenants
from Courts were collusive and fraudulent
Liquidator took possession of office space of Company-in-liquidation. As regard to remaining properties, liquidator was able to only take
symbolic possession thereof, since tenants in possession of their respective premises refused to handover same on ground that they have
obtained orders/decrees from Small Cause Courts restraining Company-in-liquidation from disturbing their possession
Company 'J' was ordered to be wound up and liquidator was directed to take possession of assets of Company-in-liquidation

Winding up of Companies – Part-1

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