In last post we discussed some provisions related to winding up by the Tribunal. In this post we will focus on Company liquidator. We will continue to discuss about winding in some future posts.
COMPANY LIQUIDATOR AND THEIR APPOINTMENTS (SECTION 275):
For the purposes of winding up of a company by the Tribunal, the Tribunal at the time of passing of the order of winding up shall appoint an Official Liquidator or a liquidator from the panel maintained as the Company Liquidator.
Provisional liquidator shall have same powers as a liquidator unless the Tribunal limit or restrict his power by an order.
The provisional liquidator or the Company Liquidator, shall be appointed from a panel maintained by the Central Government consisting of the names of chartered accountants, advocates, company secretaries, cost accountants or firms or bodies corporate having such chartered accountants, advocates, company secretaries, cost accountants and other professionals as may be notified by the Central Government or from a firm or a body corporate of persons having a combination of such professionals and having at least ten years’ experience in company matters.
The Central Government may remove the name of any person or firm or body corporate form the penal on the grounds of misconduct, fraud, misfeasance, breach of duties or professional incompetence. The Central Government shall give him or it a reasonable opportunity of being heard before remove him or it from the panel.
The terms and conditions of appointment of a provisional liquidator or Company Liquidator and the fee payable to him or it shall be specified by the Tribunal on the basis of task required to be performed, experience, qualification of such liquidator and size of the company.
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.
While passing a winding up order, the Tribunal may appoint a provisional liquidator, if any, as the Company Liquidator for the conduct of the proceedings for the winding up of the company.
REMOVAL AND REPLACEMENT OF LIQUIDATOR (SECTION 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 on any of the following grounds, namely:—
(b) fraud or misfeasance;
(c) professional incompetence or failure to exercise due care and diligence in performance of the powers and functions;
(d) inability to act as provisional liquidator or as the case may be, Company Liquidator;
(e) 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 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.
The Tribunal shall, before passing any order under this section, provide a reasonable opportunity of being heard to the provisional liquidator or, as the case may be, Company Liquidator.
INTIMATION TO LIQUIDATOR AND REGISTRAR (SECTION 277):
Where the Tribunal makes an order for appointment of provisional liquidator or for the winding up of a company, the company 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.
Notice of Discharge (Sub – section 3 of Section 277):
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.
Winding up committee (Sub – Section 4 of Section 277):
Within three 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-section (5) and such winding up committee shall comprise of the following persons, namely:—
(i) Official Liquidator attached to the Tribunal;
(ii) nominee of secured creditors; and
(iii) a professional nominated by the Tribunal.
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:—
(i) taking over assets;
(ii) examination of the statement of affairs;
(iii) recovery of property, cash or any other assets of the company including benefits derived there from;
(iv) review of audit reports and accounts of the company;
(v) sale of assets;
(vi) finalisation of list of creditors and contributories;
(vii) compromise, abandonment and settlement of claims;
(viii) payment of dividends, if any; and
(ix) any other function, as the Tribunal may direct from time to time.
The 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.
EFFECT OF WINDING UP ORDER (SECTION 278):
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.
STAY OF SUITS ETC. ON WINDING UP ORDER (SECTION 279):
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 section shall be disposed of by the Tribunal within sixty days.
This Section shall not apply to any proceeding pending in appeal before the Supreme Court or a High court.
JURISDICTION OF TRIBUNAL (SECTION 280):
The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,—
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company, including claims by or against any of its branches in India;
(c) any application made under section 233;
(d) any scheme submitted under section 262;
(e) any question of priorities or any other question whatsoever, whether of law or facts, including those relating to assets, business, actions, rights, entitlements, privileges, benefits, duties, responsibilities, obligations or in any matter arising out of, or in relation to winding up of the company.
Whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made or such scheme has been submitted, or is submitted, before or after the order for the winding up of the company is made.
We will discuss other provisions related to winding up in future posts.
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