Proper winding up of a company is certainly more important than its incorporation. The ghost of a company should not haunt after attaining or discarding objects of the company.
MODES OF WINDING – UP (SECTION 270):
The winding up of a company may be either –
- by the Tribunal; or
CIRCUMSTANCES FOR WINDING UP BY TRIBUNAL (SECTION 271):
A company may be wound up by the Tribunal on a petition filed under Section 272 of the Act.
The company may be wound up by Tribunal –
- If the company is unable to pay its debts;
- If the company has resolved by special resolution that the company be wound up by the Tribunal;
- If the company has acted against the interests of the sovereignty and integrity of India, its security of the State, friendly relations with foreign States, public order, decency or morality;
- If the Tribunal has ordered the winding up of the company under Chapter XIX i.e. in case of a sick company;
- If, on application by the Registrar or the Government, the Tribunal is of the opinion that the affairs of the company has 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;
- If the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or
- If the Tribunal is of the opinion that it is just and equitable to wind up the company.
Unable to Pay Debt (sub – section 2 of Section 271):
A company shall be deemed to be unable to pay its debts –
a) If the company has to pay the sum within twenty – one days after the receipt of demand or to provide adequate security or re – structure or compound the debt to the reasonable satisfaction of the creditor. The demand may be served:
i. A creditor by assignment or otherwise,
ii. to whom company is indebted for an amount exceeding one lakh rupees then due,
iii. by causing it to be delivered at its registered officer, by registered post or otherwise,
iv. a demand requiring the company to pay the amount so due.
b) If any execution or other process issued on a decree or order of any court or tribunal in favour of a creditor of the company is returned unsatisfied in whole or in part; or
c) If it is proved to the satisfaction of the Tribunal that the company is unable to pay its debt, and the Tribunal has taken into account the contingent and prospective liabilities of the company while determining this.
PETITION FOR WINDING UP (SECTION 272):
A petition to the Tribunal for the binding up of a company shall be presented by –
a) The company;
b) Any creditor or creditors, including any contingent or prospective creditor or creditors;
c) Any contributory or contributories;
d) All or any of the person in above clauses (a), (b) and (c) together;
e) The Registrar;
f) Any person authorised by the Central Government in that behalf; or
g) In case the company has acted against the interests of the sovereignty and integrity of India, its security of the State, friendly relations with foreign States, public order, decency or morality , by the Central Government or State Government.
A secured creditor, debenture holder and debenture trustee shall be deemed to be creditor for this Section.
A contributory shall be entitled to present a petition for winding up of a company, whether –
i. He hold fully paid – up shares, or
ii. The company have no asserts at all
iii. The company have no surplus assets left for distribution among shareholders.
The Shares in respect of which, a person is contributory or contributories were—
i. originally allotted to them, or
ii. have been held by him and registered in his name for at least six months during the eighteen months immediately before commencement of the winding up, or
iii. have devolved on him through the death of a former holder.
The Registrar shall not be entitle to present a petition for winding up on the grounds specified in clauses (b), (d) or (g) of sub – section of Section 271. the Registrar shall not present a petition on the ground that the company is unable to pay its debts unless it appears to him either from the financial condition of the company as disclosed in its balance sheet or from the report of an inspector appointed under section 210 that the company is unable to pay its debts. The Registrar shall obtain the previous sanction of the Central Government to the presentation of a petition. The Central Government 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.
Before a petition for winding up of a company presented by a contingent or prospective creditor is admitted, the leave of the Tribunal shall be obtained for the admission of the petition and such leave shall not be granted, unless in the opinion of the Tribunal there is a prima facie case for the winding up of the company and until such security for costs has been given as the Tribunal thinks reasonable.
A copy of the petition made under this section shall also be filed with the Registrar and the Registrar shall, without prejudice to any other provisions, submit his views to the Tribunal within sixty days of receipt of such petition.
POWERS OF TRIBUNAL (SECTION 273):
The Tribunal, on receipt of a petition for winding up, may pass any of the following orders, namely—
- dismiss it, with or without costs;
- make any interim order as it think fit;
- appoint a provisional liquidator of the company till the making of a winding up order;
- make an order for the winding up of the company with or without cost; or
- any other order as it think fit.
The Tribunal shall make the order within ninety days from the date of presentation of the petition.
Before appointing a provisional liquidator, the Tribunal shall give notice to the company and afford a reasonable opportunity to it to make its representations. However, for special reasons to be recorded in writing, the Tribunal may dispense with such notice.
The 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.
DIRECTIONS FOR FILING STATEMENT OF AFFAIRS (SECTION 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 thirty days of the order.
The Tribunal may allow a further period of thirty days in a situation of contingency or special circumstances.
The Tribunal 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, 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.
The directors and other officers of the company, in respect of which an order for winding up is passed by the Tribunal, shall 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 liquidator within a period of thirty days of such order.
If any director or officer of the company contravenes the provisions of this section, the director or the officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both. 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.
We will discuss other provisions related to winding up in future posts.
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