Right of Central Government to apply under sections 397
and 398.
401. The
Central Government may itself apply to the [Tribunal] for an order under section 397 or 398, or cause
an application to be made to the [Tribunal] for such an order by any person authorised by it in this behalf.
Powers of [Tribunal]
on application under section 397 or 398.
402. Without
prejudice to the generality of the powers of the [Tribunal] under section 397 or
398, any order under either section may provide for—
(a) the regulation of the conduct of the company’s affairs in
future;
(b) the purchase of the shares or interests of any members of
the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as
aforesaid, the consequent reduction of its share capital;
(d) the termination, setting aside or modification of any
agreement, howsoever arrived at, between the company on the one hand, and any
of the following persons, on the other, namely :—
(i) the managing director,
(ii) any other director,
(iii)
and
(iv) [***]
(v) the manager, upon such terms and conditions as may, in the
opinion of the [Tribunal],
be just and equitable in all the circumstances of the case;
(e) the
termination, setting aside or modification of any agreement between the company
and any person not referred to in clause (d), provided that no such agreement shall be terminated, set
aside or modified except after due notice to the party concerned and provided
further that no such agreement shall be modified except after obtaining the
consent of the party concerned;
(f) the
setting aside of any transfer, delivery of goods, payment, execution or other
act relating to property made or done by or against the company within three
months before the date of the application under section 397 or 398, which
would, if made or done by or against an individual, be deemed in his insolvency
to be a fraudulent preference;
(g) any other matter for which in the opinion of the [Tribunal] it is just and equitable that provision should be made.
403. Pending
the making by it of a final order under section 397 or 398, as the case may be,
the [Tribunal]
may, on the application of any party to the proceeding, make any interim order
which it thinks fit for regulating the conduct of the company’s affairs, upon
such terms and conditions as appear to it to be just and equitable.
Effect of alteration of memorandum or articles of company
by order under section 397 or 398.
404.
(1) Where an order under section 397 or 398 makes any alteration
in the memorandum or articles of a company, then, notwithstanding any other
provision of this Act, the company shall not have power, except to the extent,
if any, permitted in the order, to make without the leave of the [Tribunal], any alteration
whatsoever which is inconsistent with the order, either in the memorandum or in
the articles.
(2) Subject to the provisions of sub-section (1), the alterations
made by the order shall, in all respects, have the same effect as if they had
been duly made by the company in accordance with the provisions of this Act;
and the said provisions shall apply accordingly to the memorandum or articles
as so altered.
(3) A certified copy of every order altering, or giving leave to
alter, a company’s memorandum or articles, shall within [thirty] days after the
making thereof, be filed by the company with the Registrar who shall register
the same.
(4) If default is made in complying with the provisions of
sub-section (3), the company, and every officer of the company who is in
default, shall be punishable with fine which may extend to [fifty] thousand
rupees.
Addition of respondents to application under section 397
or 398.
405. If
the managing director or any other director [***] or the manager, of a company,
or any other person, who has not been impleaded as a
respondent to any application under section 397 or 398 applies to be added as a
respondent thereto, the [Tribunal]
shall, if it is satisfied that there is sufficient cause for doing so, direct
that he may be added as a respondent accordingly.
Application of sections 539 to 544 to proceedings under
sections 397 and 398.
406. In
relation to an application under section 397 or 398, sections 539 to 544, both
inclusive, shall apply in the form set forth in Schedule XI.
Consequences of termination or modification of certain
agreements.
407.
(1) Where an order [***] made under section 397 or 398 terminates,
sets aside, or modifies an agreement such as is referred to in clause (d) or (e) of section 402,—
(a) the order shall not give rise to any claim whatever against
the company by any person for damages or for compensation for loss of office or
in any other respect, either in pursuance of the agreement or otherwise;
(b) no managing or other director [***] or manager whose agreement is so terminated
or set aside [***] shall, for a period
of five years from the date of [the order terminating or setting aside the
agreement], without the leave of the [Tribunal], be appointed, or act, as the managing or other
director [***] or manager of the company.
(2)
(a) Any person who
knowingly acts as a managing or other director [***] or manager of a company in
contravention of clause (b) of
sub-section (1);
(b) [***]
(c) every other
director or every director, as the case may be, of the company, who is
knowingly a party to such contravention; shall be punishable with imprisonment
for a term which may extend to one year, or with fine which may extend to
[fifty] thousand rupees, or with both.
(3) [No leave shall be granted] under clause (b) of sub-section (1) unless notice
of the intention to apply for leave has been served on the Central Government
and that Government has been given an opportunity of being heard in the matter.
B. Powers of Central Government
Powers of Government to prevent oppression or
mismanagement.
408.
[(1) Notwithstanding anything contained in this Act, the Central Government
may appoint such number of persons as the [Tribunal] may, by order in writing, specify as being
necessary to effectively safeguard the interests of the company, or its
shareholders or the public interests to hold office as directors thereof for such
period, not exceeding three years on any one occasion, as it may think fit, if
the [Tribunal],
on a reference made to it by the Central Government or on an application of not
less than one hundred members of the company or of the members of the company
holding not less than one-tenth of the total voting power therein, is
satisfied, after such inquiry as it deems fit to make, that it is necessary to
make the appointment or appointments in order to prevent the affairs of the
company being conducted either in a manner which is oppressive to any members
of the company or in a manner which is prejudicial to the interests of the
company or to public interest :
Provided that in lieu of passing an order as aforesaid, the [Tribunal] may, if the company
has not availed itself of the option given to it under section 265, direct the
company to amend its articles in the manner provided in that section and make
fresh appointments of directors in pursuance of the articles as so amended,
within such time as may be specified in that behalf by the [Tribunal].
(2) In case the [Tribunal]
passes an order under the proviso to sub-section (1), it may, if it thinks fit,
direct that until new directors are appointed in pursuance of the order
aforesaid, such number of persons as the [Tribunal] may, by order, specify as being necessary to
effectively safeguard the interests of the company, or its shareholders or the
public interest, shall hold office as additional directors of the company and
on such directions, the Central Government shall appoint such additional
directors.]
(3) For the purpose of reckoning two-thirds or any other
proportion of the total number of directors of the company, any director or
directors appointed by the Central Government under sub-section (1) or (2)
shall not be taken into account.
[(4) A person appointed under sub-section (1) to hold office as a
director or a person directed under sub-section (2) to hold office as an
additional director, shall not be required to hold any qualification shares nor
his period of office shall be liable to determination by retirement of
directors by rotation; but any such director or additional director may be
removed by the Central Government from his office at any time and another
person may be appointed by that Government in his place to hold office as a
director or, as the case may be, an additional director.
(5) No change in the Board of directors made after a person is
appointed or directed to hold office as a director or additional director under
this section shall, so long as such director or additional director holds
office, have effect unless confirmed by the [Tribunal].
[(6) Notwithstanding anything contained in this
Act or in any other law for the time being in force, where any person is appointed
by the Central Government to hold office as director or additional director of
a company in pursuance of sub-section (1) or sub-section (2), the Central
Government may issue such directions to the Company as it may consider
necessary or appropriate in regard to its affairs [and such directions may
include directions to remove an auditor already appointed and to appoint
another auditor in his place or to alter the articles of the company, and upon
such directions being given, the appointment, removal or alteration, as the
case may be, shall be deemed to have come into effect as if the provisions of
this Act in this behalf have been complied with without requiring any further
act or thing to be done].
(7) The Central Government may require the persons appointed as
directors or additional directors in pursuance of sub-section (1) or
sub-section (2) to report to the Central Government from time to time with
regard to the affairs of the company.]
Power of [Tribunal] to prevent change in Board
of directors likely to affect company prejudicially.
409.
(1) Where a complaint is made to the [Tribunal] by the managing
director or any other director [***] or the manager of a company that as a
result of a change which has taken place or is likely to take place in the
ownership of any shares held in the company, a change in the Board of directors
is likely to take place which (if allowed) would affect prejudicially the
affairs of the company, the [Tribunal]
may, if satisfied, after such inquiry as it thinks fit to make that it is just
and proper so to do, by order, direct that [no resolution passed or that may be
passed or no action taken or that may be taken] to effect a change in the Board
of directors after the date of the complaint shall have effect unless confirmed
by the [Tribunal];
and any such order shall have effect notwithstanding anything to the contrary
contained in any other provision of this Act or in the memorandum or articles
of the company, or in any agreement with, or any resolution passed in general
meeting by, or by the Board of directors of, the company.
(2) The [Tribunal]
shall have power when any such complaint is received by it, to make an interim
order to the effect set out in sub-section (1), before making or completing the
inquiry aforesaid.
(3) Nothing contained in sub-sections (1) and (2) shall apply to
a private company, unless it is a subsidiary of a public company.
Constitution and Powers of [Advisory
Committee]
[Appointment of Advisory Committee.
410. For the purpose of advising the Central Government and the [Tribunal] on such matters arising out of the administration of this Act as may be referred to it by that Government or [the Tribunal], the Central Government may constitute an Advisory Committee consisting of not more than five persons with suitable qualifications.]
Duties of Advisory Commission.
411. [Omitted by the Companies (Amendment) Act, 1965, w.e.f
15-10-1965.]
Forms and procedure in cases
referred to Advisory Commission.
412. [Omitted by the Companies (Amendment) Act, 1965, w.e.f.
15-10-1965.]
Powers of Advisory Commission.
413. [Omitted by the Companies (Amendment) Act, 1965, w.e.f.
15-10-1965.]
414. [Omitted by the Companies (Amendment) Act, 1965, w.e.f.
15-10-1965.]
Immunity for action taken in good faith.
415. [Omitted by the Companies (Amendment) Act, 1965, w.e.f.
15-10-1965.]
MISCELLANEOUS PROVISIONS
Contracts where company is undisclosed
principal
Contracts
by agents of company in which company is undisclosed principal.
416.
(1) Every person, being the [***] manager or other agent of a public
company or of a private company which is a subsidiary of a public company, who
enters into a contract for or on behalf of the company in which contract the
company is an undisclosed principal shall, at the time of entering into the
contract, make a memorandum in writing of the terms of the contract, and
specify therein the person with whom it is entered into.
(2) Every such person who enters into a contract as aforesaid
shall forthwith deliver the memorandum to the company and send copies thereof
to each of the directors; and such memorandum shall be filed in the office of
the company and laid before the Board of directors at its next meeting.
(3) If default is made in complying with the requirements of this
section,—
(a) the contract shall, at the option of the company, be voidable as against the company; and
(b) the person who enters into the contract, or every officer of the company who is in default, as the case may be, shall be punishable with fine which may extend to [two thousand] rupees.
Employees’ securities and
provident funds
Employees’
securities to be deposited in [post office savings bank or Scheduled Bank].
417.
[(1) Any money or security deposited with a company by any of its
employee in pursuance of his contract of service with the company shall be kept
or deposited by the company within fifteen days from the date of deposit—
(a) in a post
office savings bank account, or
(b) in a special account to be opened by the company for the
purpose in the State Bank of
(c) where the company itself is a Scheduled Bank, in a special
account to be opened by the company for the purpose either in itself or in the
State Bank of
(2) No portion of such moneys or securities shall be utilised by the company except for the purposes agreed to
in the contracts of service.
(3) A receipt for moneys deposited with a company by its employee shall not be deemed to be a security within the meaning of this section; and the moneys themselves shall accordingly be deposited [***] as provided in sub-section (1).
Provisions applicable to provident funds of employees.
418.
[(1) Where a provident fund has been constituted by a company for
its employees or any class of its employees, all moneys contributed to such
fund (whether by the company or by the employees) or received or accruing by
way of interest or otherwise to such fund shall, within fifteen days from the
date of contribution, receipt or accrual, as the case may be, either—
(a) be deposited—
(i) in a post office savings bank
account, or
(ii) in a special account to be opened by the company for the
purpose in the State Bank of
(iii) where
the company itself is a Scheduled Bank, in a special account to be opened by
the company for the purpose either in itself or in the State Bank of India or in any other Scheduled Bank;
or
(b) be
invested in the securities mentioned or referred to in clauses (a) to (e) of section 20 of the Indian Trusts Act, 1882 (2 of 1882).]
(2) Notwithstanding anything to the contrary in the rules of any
provident fund to which sub-section (1) applies or in any contract between a
company and its employees, no employee shall be entitled to receive, in respect
of such portion of the amount to his credit in such fund as is invested in
accordance with the provisions of sub-section (1), interest at a rate exceeding
the rate of interest yielded by such investment.
(3) Nothing in sub-section (1) shall affect any rights of an
employee under the rules of a provident fund to obtain advances from or to
withdraw money standing to his credit in the fund, where the fund is a recognised provident fund within the meaning of clause (a) of section 58A of the Indian
Income-tax Act, 1922 (11 of 1922), or where the rules of the fund contain
provisions corresponding to rules 4, 5, 6, 7, 8 and 9 of the Indian Income-tax
(Provident Funds Relief) Rules.
(4) Where a [***] trust has been created by a company with
respect to any provident fund referred to in sub-section (1), the company shall
be bound to collect the contributions of the employees concerned and pay such
contribution as well as its own contributions, if any, to the trustees [within
fifteen days from the date of collection]; but in other respects, the obligations
laid on the company by this section shall devolve on the trustees and shall be
discharged by them instead of by the company.
Right of employee to see bank’s
receipt for moneys or securities referred to in section 417 or 418.
419. An
employee shall be entitled, on request made in this behalf to the company, or
to the trustees referred to in sub-section (4) of section 418, as the case may
be, to see the bank’s receipt for any money or security such as is referred to
in sections 417 and 418.
Penalty for contravention of sections 417, 418 and 419.
420. Any
officer of a company, or any such trustee of a provident fund as is referred to
in sub-section (4) of section 418 who, knowingly, contravenes, or authorises or permits the contravention of, the provisions
of section 417, 418 or 419, shall be punishable with [imprisonment for a term
which may extend to six months, or with fine which may extend to [ten] thousand
rupees.]
Filing of accounts of receivers
421. Every receiver of the property of a company who has been appointed under a power conferred by any instrument and who has taken possession, shall once in every half year while he remains in possession, and also on ceasing to act as receiver, file with the Registrar an abstract in the prescribed form of his receipts and payments during the period to which the abstract relates.
Invoices, etc., to refer to
receiver where there is one.
422. Where
a receiver of the property of a company has been appointed, every invoice,
order for goods, or business letter issued by or on behalf of the company, or the receiver of the company, being a document on
or in which the name of the company appears, shall contain a statement that a
receiver has been appointed.
Penalty for non-compliance with sections 421 and 422.
423. If
default is made in complying with the requirements of section 421 or 422, the
company, and every officer of the company who is in default, shall be
punishable with fine which may extend to [two thousand] rupees.
For the purposes of this section, the receiver shall be deemed to be an officer of the company.
Application of sections 421 to 423 to receivers and
managers appointed by Tribunal and managers appointed in pursuance of an
instrument.
424. The provisions of sections 421 to 423 shall apply to the receiver of,
or any person appointed to manage, the property of a company, appointed by the
Tribunal or to any person appointed to manage, the property of a company under
any powers contained in an instrument, in like manner as they apply to a receiver appointed
under any powers contained in an instrument.]
Revival
and Rehabilitation of Sick
Industrial Companies
424A.
(1) Where an industrial company, has become
a sick industrial company, the Board of directors of such company shall make a
reference to the Tribunal, and prepare a scheme of its revival and
rehabilitation and submit the same to the Tribunal along with an application
containing such particulars as may be prescribed, for determination of the
measures which may be adopted with respect to such company:
Provided that
nothing contained in this sub-section shall apply to a Government company:
Provided further that
a Government company may, with the prior approval of the Central Government or
a State Government, as the case may be, make a reference to the Tribunal in
accordance with the provisions of this sub-section and thereafter all the provisions
of this Act shall apply to such Government company:
[Provided also that in case any reference had been made
before the Tribunal and a scheme for revival and rehabilitation submitted
before the commencement of the Enforcement of Security Interest and Recovery
of Debts Laws (Amendment) Act, 2004, such reference shall abate if the secured
creditors representing three-fourth in value of the amount outstanding against
financial assistance disbursed to the borrower have taken measures to recover
their secured debt under sub-section (4) of section 13 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act,
2002 (54 of 2002) :
Provided also that no reference shall be made under this
section if the secured creditors representing three-fourth in value of the
amount outstanding against financial assistance disbursed to the borrower have
taken measures to recover their secured debt under sub-section (4) of section
13 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002)].
(2) The application under sub-section (1)
shall be accompanied by a certificate from an auditor from a panel of auditors
prepared by the Tribunal indicating—
(a) the reasons of the net worth of such company being fifty per
cent or less than fifty per cent; or
(b) the default in repayment of its debt
making such company a sick industrial company, as the case may be.
(3) Without prejudice to the provisions of
sub-section (1), the Central Government or the Reserve Bank or a State
Government or a public financial institution or a State level institution or a
scheduled bank may, if it has sufficient reasons to believe that any industrial
company has become, for the purposes of this Act, a sick industrial company,
make a reference in respect of such company to the Tribunal for determination
of the measures which may be adopted with respect to such company:
Provided that a reference shall not be
made under this sub-section in respect of any industrial company by—
(a) the Government
of any State unless all or any of the industrial undertakings belonging to such
company are situated in such State;
(b) a public financial institution or a
State level institution or a scheduled bank unless it has, by reason of any
financial assistance or obligation rendered by it, or undertaken by it, with
respect to such company, an interest in such company.
(4) A reference under sub-section (1) or
sub-section (3) shall be made to the Tribunal within a period of one hundred
and eighty days from the date on which the Board of directors of the company or
the Central Government or the Reserve Bank of India or a State Government or a
public financial institution or a State level institution or a scheduled bank,
as the case may be, come to know, of the relevant facts giving rise to causes
of such reference or within sixty days of final adoption of accounts, whichever
is earlier.
(5) The
Tribunal may, on receipt of a reference under sub-section (1), pass an order as
to whether a company in respect of which a reference has been made has become a
sick industrial company and such order shall be final.
Inquiry
into working of sick industrial companies.
424B.
(1) The
Tribunal may make such inquiry as it may deem fit for determining whether any
industrial company has become a sick industrial company—
(a) upon receipt of a reference with respect to such company
under section 424A; or
(b) upon information
received with respect to such company or upon its own knowledge as to the
financial condition of the company.
(2) The
Tribunal may, if it deems necessary or expedient so to do for the expeditious
disposal of an inquiry under sub-section (1), require by order any operating
agency to enquire into the scheme for revival and make a report with respect to
such matters as may be specified in the order.
(3) The
operating agency shall complete its inquiry as expeditiously as possible and
submit its report to the Tribunal within twenty-one days from the date of such
order:
Provided that the Tribunal may extend the said period
to forty days for reasons to be recorded in writing for such extension.
(4) The
Tribunal shall conclude its enquiry as expeditiously as possible and pass final
orders in the proceedings within sixty days from the commencement of the
inquiry:
Provided that the Tribunal may extend the said period
to ninety days for reasons to be recorded in writing for such extension.
Explanation.—For the purposes
of this sub-section, an inquiry shall be deemed to have commenced upon the
receipt by the Tribunal of any reference or information or upon its own
knowledge reduced to writing by the Tribunal.
(5) Where
the Tribunal deems it fit to make an enquiry or to cause an inquiry to be made
into any industrial company under sub-section (1) or, as the case may be, under
sub-section (2), it may appoint one or more persons who possess knowledge,
experience and expertise in management and control of the affairs of any other
company to be a special director or special directors on the board of such
industrial company on such terms and conditions as may be prescribed for
safeguarding its financial and other interests or in the public interest.
(6) The
special director or special directors appointed under sub-section (5) shall
submit a report to the Tribunal within sixty days from the date of appointment
of such director or directors about the state of affairs of the company in
respect of which reference has been made under sub-section (1) and such special
director or directors shall have all the powers of a director of a company
under this Act, necessary for discharge of his or their duties.
(7) The
Tribunal may issue such directions to a special director appointed under
sub-section (5) as it may deem necessary or expedient for proper discharge of
his duties.
(8) The
appointment of a special director referred to in sub-section (5) shall be valid
and effective notwithstanding anything to the contrary contained in any other
provision of this Act or in any other law for the time being in force or in the
memorandum and articles of association or any other instrument relating to the
industrial company, and any provision regarding share qualification, age
limit, number of directorships, removal from office of directors and such like
conditions contained in any such law or instrument aforesaid, shall not apply
to any special director or directors appointed by the Tribunal.
(9) Any special director appointed under sub-section
(5), shall—
(a) hold office
during the pleasure of the Tribunal and may be removed or substituted by any
person by order of the Tribunal;
(b) not incur any
obligation or liability by reason only of his being a director or for anything
done or omitted to be done in good faith in the discharge of his duties as a
director or anything in relation thereto;
(c) not be liable
to retirement by rotation and shall not be taken into account for computing the
number of directors liable to such retirement;
(d) not be liable
to be prosecuted under any law for anything done or omitted to be done in good
faith in the discharge of his duties in relation to the sick industrial
company.
Powers
of Tribunal to make suitable order on completion of inquiry.
424C.
(1) If
after making an inquiry under section 424B, the Tribunal is satisfied that
a company has become a sick industrial
company, the Tribunal shall, after considering all the relevant facts and
circumstances of the case, decide, as soon as may be, by an order in writing,
whether it is practicable for the company to make its net worth exceed the
accumulated losses or make the repayment of its debts referred to in clause (b) of
sub-section (2) of section 424A within a reasonable time.
(2) If
the Tribunal decides under sub-section (1) that it is practicable for a sick
industrial company to make its net worth exceed the accumulated losses or pay
its debt referred to in that sub-section within a reasonable time, the Tribunal
shall, by order in writing and subject to such restrictions or conditions as
may be specified in the order, give such time to the company as it may deem fit
to make its net worth exceed the accumulated losses or make repayment of the
debts.
(3) If
the Tribunal decides under sub-section (1) that it is not practicable for a
sick industrial company to make its net worth exceed the accumulated losses or
make the repayment of its debts referred to in clause (b) of
sub-section (2) of section 424A, within a reasonable time and that it is
necessary or expedient in the public interest to adopt all or any of the
measures specified in section 424D in relation to the said company it may, as
soon as may be, by order in writing, direct any operating agency specified in
the order to prepare, having regard to such guidelines as may be specified in
the order, a scheme providing for such measures in relation to such company.
(4) The Tribunal may,—
(a) if any of the restrictions or conditions
specified in an order made under sub-section (2) are not complied with by the
company concerned, or if the company fails to revive in pursuance of the said
order, review such order on a reference in that behalf from any agency referred
to in sub-section (3) of section 424A or on its own motion and pass a fresh
order in respect of such company under sub-section (3);
(b) if the
operating agency specified in an order made under sub-section (3) makes a
submission in that behalf, review such order and modify the order in such
manner as it may deem appropriate.
Preparation
and sanction of schemes.
424D.
(1) Where an order is made under sub-section (3) of section 424C
in relation to any sick industrial company, the operating agency specified in
the order shall prepare as expeditiously as possible and ordinarily within a
period of sixty days from the date of such order, having regard to the
guidelines framed by the Reserve Bank of India in this behalf, a scheme with
respect to such company providing for any one or more of the following
measures, namely:—
(a) the financial reconstruction of such industrial company;
(b) the proper
management of such industrial company by change in, or take over of, the
management of such industrial company;
(c) the amalgamation of—
(i) such
industrial company with any other company; or
(ii) any other company with such industrial
company (hereafter in this section, in the case of sub-clause (i), the other
company, and in the case of sub-clause (ii), such industrial company, referred to as “transferee company”);
(d) the sale or lease of a part or whole of any industrial
undertaking of such industrial company;
(e) the rationalisation of managerial personnel, supervisory staff
and workmen in accordance with law;
(f) such other preventive, ameliorative and remedial measures
as may be appropriate;
(g) repayment of debt;
(h) such
incidental, consequential or supplemental measures as may be necessary or
expedient in connection with or for the purposes of the measures specified in
clauses (a) to (g):
Provided that the Tribunal may extend the said period of sixty days to ninety
days for reasons to be recorded in writing for such extension.
(2) The scheme referred to in sub-section (1) may provide for any
one or more of the following, namely:—
(a) the constitution, name and registered
office, the capital, assets, powers, rights, interests, authorities and
privileges, duties and obligations of the sick industrial company or, as the
case may be, of the transferee company;
(b) the transfer to the transferee company
of the business, properties, assets and liabilities of the sick industrial
company on such terms and conditions as may be specified in the scheme;
(c) any change in the Board of directors, or
the appointment of a new Board of directors, of the sick industrial company
and the authority by whom, the manner in which and the other terms and
conditions on which, such change or appointment shall be made and in the case
of appointment of a new Board of directors or of any director, the period for
which such appointment shall be made;
(d) the alteration of the memorandum or
articles of association of the sick industrial company or, as the case may be,
of the transferee company for the purpose of altering the capital structure
thereof, or for such other purposes as may be necessary to give effect to the
reconstruction or amalgamation;
(e) the continuation by or against the sick
industrial company or, as the case may be, the transferee company of any action
or other legal proceeding pending against the sick industrial company immediately
before the date of the order made under sub-section (3) of section 424C;
(f) the reduction of the interest or rights
which the shareholders have in the sick industrial company to such extent as
the Tribunal considers necessary in the interests of the reconstruction,
revival or rehabilitation or repayment of debts of such sick industrial company
or for the maintenance of the business of such industrial company;
(g) the allotment to the shareholders of the
sick industrial company, of shares in such company or, as the case may be, in
the transferee company and where any shareholder claims payment in cash and not
allotment of shares or where it is not possible to allot shares to any
shareholder, the payment of cash to those shareholders in full satisfaction of
their claims—
(i) in respect of their interest in shares in the sick
industrial company before its reconstruction or amalgamation; or
(ii) where such
interest has been reduced under clause (f) in respect of their interest in shares as so reduced;
(h) any other terms
and conditions for the reconstruction or amalgamation of the sick industrial
company;
(i) sale
of the industrial undertaking of the sick industrial company free from all
encumbrances and all liabilities of the company or other such encumbrances and
liabilities as may be specified, to any person, including a co-operative
society formed by the employees of such undertaking and fixing of reserve price
for such sale;
(j) lease of the
industrial undertaking of the sick industrial company to any person, including
a co-operative society formed by the employees of such undertaking;
(k) method of sale
of assets of the industrial undertaking of the sick industrial company such as
by public auction or by inviting tenders or in any other manner as may be
specified and for the manner of publicity therefor;
(l) issue of the shares in the sick
industrial company at the face value or at the intrinsic value which may be at
discount value or such other value as may be specified to any industrial
company or any person including the executives and employees of such sick
industrial company;
(m) such incidental,
consequential and supplemental matters as may be necessary to secure that the reconstruction
or amalgamation or other measures mentioned in the scheme are fully and
effectively carried out.
(3)
(a) The
scheme prepared by the operating agency shall be examined by the Tribunal and a
copy of the scheme with modification, if any, made by the Tribunal shall be
sent, in draft, to the sick industrial company and the operating agency and in
the case of amalgamation, also to any other company concerned, and the Tribunal
may publish or cause to be published the draft scheme in brief in such daily
newspapers as the Tribunal may consider necessary, for suggestions and
objections, if any, within such period as the Tribunal may specify.
(b) The
complete draft scheme shall be kept at the place where registered office of the
company is situated or at such places as mentioned in the advertisement.
(c) The
Tribunal may make such modifications, if any, in the draft scheme as it may
consider necessary in the light of the suggestions and objections received from
the sick industrial company and the operating agency and also from the
transferee company and any other company concerned in the amalgamation and from
any shareholder or any creditors or employees of such companies:
Provided that where the scheme relates to amalgamation, the said scheme shall be
laid before the company other than the sick industrial company in the general
meeting for the approval of the scheme by its shareholders and no such scheme
shall be proceeded with unless it has been approved, with or without
modification, by a special resolution passed by the shareholders of the transferee
company.
(4) The scheme may thereafter be sanctioned, within sixty days by
the Tribunal (hereinafter referred to as the sanctioned scheme) and shall come
into force on such date as the Tribunal may specify in this behalf:
Provided further that the Tribunal may extend the said period
of sixty days to ninety days for reasons to be recorded in writing for such
extension:
Provided also that different dates may be specified for
different provisions of the scheme.
(5) The
Tribunal may, on the recommendations of the operating agency or otherwise,
review any sanctioned scheme and make such modifications as it may deem fit or
may by order in writing direct any operating agency specified in the order,
having regard to such guidelines including the guidelines framed by the Reserve
Bank of India in this behalf in order to prepare a fresh scheme providing for
such measures as the operating agency may consider necessary.
(6) When a fresh scheme is prepared under sub-section
(5), the provisions of sub-sections (3) and (4) shall apply in relation thereto
as they apply to in relation to a scheme prepared under sub-section (1).
(7) Where a sanctioned scheme provides for
the transfer of any property or liability of the sick industrial company in favour of any other company or person or where such scheme
provides for the transfer of any property or liability of any other company or
person in favour of the sick industrial company,
then, by virtue of, and to the extent provided in, the scheme, on and from the
date of coming into operation of the sanctioned scheme or any provision
thereof, the property shall be transferred to, and vest in, and the liability
shall become the liability of, such other company or person or, as the case may
be, the sick industrial company.
(8) The sanction accorded by the Tribunal
under sub-section (4) shall be conclusive evidence that all the requirements of
this scheme relating to the reconstruction or amalgamation, or any other
measure specified therein have been complied with and a copy of the sanctioned
scheme certified in writing by an officer of the Tribunal to be a true copy
thereof, shall, in all legal proceedings (whether in appeal or otherwise), be
admitted as evidence.
(9) A copy of the sanctioned scheme referred
to in sub-section (8) shall be filed with the Registrar within the prescribed
time by the company in respect of which such scheme relates.
(10) On and from the date of the coming into
operation of the sanctioned scheme or any provision thereof, the scheme or such
provision shall be binding on the sick industrial company and the transferee
company or, as the case may be, the other company and also on the shareholders,
creditors and guarantors and employees of the said companies.
(11) The creditors of a sick industrial company
may also prepare a scheme for revival or rehabilitation of such sick industrial
company and submit the same to the Tribunal for its sanction:
Provided that no scheme shall be submitted by the
creditors to the Tribunal unless such scheme has been approved by at least
three-fourth in value of creditors of the sick industrial company.
(12) All the provisions relating to the
preparation of scheme by the operating agency and sanction of such scheme by
the Tribunal shall, as far as may be, apply to the scheme referred to in
sub-section (11).
(13) The scheme referred to in sub-section (11)
if sanctioned by the Tribunal shall be binding on all the creditors and on
other concerned.
(14) If any difficulty arises in giving effect
to the provisions of the sanctioned scheme, the Tribunal may, on the
recommendation of the operating agency or otherwise, by order, do anything, not
inconsistent with such provisions, which appears to it to be necessary or
expedient for the purpose of removing the difficulty.
(15) The Tribunal may, if it deems necessary or
expedient so to do, by order in writing, direct any operating agency specified
in the order to implement a sanctioned scheme with such terms and conditions
and in relation to the sick industrial company as may be specified in the
order.
(16) Where the whole of the
undertaking of the sick industrial company is sold under a sanctioned scheme,
the Tribunal may distribute the sale proceeds to the parties entitled thereto
in accordance with the provisions of section 529A and other provisions of this
Act.
(17) The Tribunal may monitor periodically the
implementation of the sanctioned scheme.
Rehabilitation by giving financial assistance.
424E.
(1) Where the scheme relates to preventive,
ameliorative, remedial and other measures with respect to the sick industrial
company, the scheme may provide for financial assistance by way of loans,
advances or guarantees or reliefs or concessions or
sacrifices from the Central Government, a State Government, any scheduled bank
or other bank, a public financial institution or State level institution or any
institution or other authority (any Government, bank, institution or other
authority required by a scheme to provide for such financial assistance being
hereafter in this section referred to as the person required by the scheme to
provide financial assistance) to the sick industrial company.
(2) Every scheme referred to in sub-section
(1) shall be circulated to every person required by the scheme to provide
financial assistance for his consent within a period of sixty days from the
date of such circulation or within such further period, not exceeding sixty
days, as may be allowed by the Tribunal, and if no consent is received within
such period or further period, it shall be deemed that consent has been given.
(3) Where in respect of any scheme the
consent referred to in sub-section (2) is given by every person required by the
scheme to provide financial assistance, the Tribunal may, as soon as may be,
sanction the scheme and on and from the date of such sanction the scheme shall
be binding on all concerned.
(4) On the sanction of the scheme under
sub-section (3), the financial institutions and the banks required to provide
financial assistance, shall designate by mutual agreement a financial
institution and a bank from amongst themselves which shall be responsible to
disburse financial assistance by way of loans or advances or guarantees or reliefs or concessions or sacrifices agreed to be provided
or granted under the scheme on behalf of all financial institutions and banks
concerned.
(5) The financial institution and the bank
designated under sub-section (4) shall forthwith proceed to release the
financial assistance to the sick industrial company in fulfilment
of the requirement in this regard.
(6) Where in respect of any scheme consent
under sub-section (2) is not given by any person required by the scheme to provide financial assistance, the Tribunal
may adopt such other measures, including the winding up of the sick industrial
company, as it may deem fit.
Arrangement for continuing operations, etc., during
inquiry.
424F.
(1) At any time before completion of the
inquiry under section 424B, the sick industrial company or the Central Government
or the Reserve Bank of India or a State Government or a public financial
institution or a State level institution or a scheduled bank or any other
institution, bank or authority providing or intending to provide any financial
assistance by way of loans or advances or guarantees or reliefs,
or concessions to such industrial company may make an application to the
Tribunal—
(a) agreeing to an arrangement for continuing the operations
of the sick industrial company; or
(b) suggesting a scheme for the financial reconstruction
of the sick industrial company.
(2) The Tribunal may, within sixty days of
the receipt of the application under sub-section (1), pass such orders thereon
as it may deem fit.
Winding up of sick industrial company.
424G.
(1) Where the Tribunal, after making inquiry
under section 424B and after consideration of all the relevant facts and circumstances
and after giving an opportunity of being heard to all concerned parties, is of
the opinion that the sick industrial company is not likely to make its net
worth exceed the accumulated losses within a reasonable time while meeting all
its financial obligations and that the company as a result thereof is not
likely to become viable in future and that it is just and equitable that the
company should be wound up, it may record its findings and order winding up of
the company.
(2) For the purpose of winding up of the
sick industrial company, the Tribunal may appoint any officer of the operating
agency, if the operating agency gives its consent, as the liquidator of such
industrial company and the officer so appointed shall for the purpose of the
winding up of such sick industrial company, be deemed to be, and have all the
powers of, the official liquidator under this Act.
(3) Notwithstanding anything contained in
sub-section (2), the Tribunal may cause to be sold the assets of the sick
industrial company in such manner as it may deem fit and pass orders for
distribution in accordance with the provisions of section 529A, and other
provisions of this Act.
(4) Without prejudice to the other
provisions contained in this Act, the winding up of a company shall, as far as
may be, concluded within one year from the date of
the order made under sub-section (1).
Operating agency to prepare complete inventory, etc.
424H. Where for the proper
discharge of the functions of the Tribunal under this Part, the circumstances
so require, the Tribunal may, through any operating agency, cause to be prepared—
(a) with respect to
a company a complete inventory of—
(i) all assets and liabilities of whatever nature;
(ii) all books of account, registers, maps,
plans, records, documents of title or ownership of property and all other documents
of whatever nature relating thereto;
(b) a list of
shareholders and a list of creditors showing separately in the list of
creditors, the secured creditors and unsecured creditors;
(c) a valuation
report in respect of the shares and assets in order to arrive at the reserve price
for the sale of a part or whole of the industrial undertaking of the company or
for fixation of the lease rent or share exchange ratio;
(d) an estimate of
reserve price, lease rent or share exchange ratio;
(e) proforma
accounts, where no up-to-date audited accounts are available.
Direction not to dispose of
assets.
424-I. The
Tribunal may, if it is of opinion, that any direction is necessary in the
interest of the sick industrial company or creditors or shareholders or in the
public interest, by order, direct such company not to dispose of, except with
the prior approval of the Tribunal, any of its assets during the period of
inquiry under section 424B or during the period of preparation or consideration
of the scheme under section 424C.
Power of Tribunal to call for
periodic information.
424J. On receipt of reference under section 424A,
the Tribunal may call for any periodic information from the company as to the
steps taken by the company to make its net worth exceed the accumulated losses
or to make repayment of its debts referred to in that section, as the case may
be, and the company shall furnish such information.
424K.
(1) If, in the course of scrutiny or implementation of any scheme
or proposal, it appears to the Tribunal
that any person who has taken part in the promotion, formation or management of
the sick industrial company or its undertaking, including any past or present
director, manager or officer or employee of the sick industrial company—
(a) has misapplied
or retained, or become liable or accountable for, any money or property of the
sick industrial company; or
(b) has
been guilty of any misfeasance, malfeasance or non-feasance
or breach of trust in relation to the sick industrial company, the Tribunal
may, by order, direct him to repay or restore the money or property or any part
thereof, with or without interest, as it thinks just, or to contribute such sum
to the assets of the sick industrial company or the other person, entitled
thereto by way of compensation in respect of the misapplication, retainer,
misfeasance or breach of trust as the Tribunal thinks just, and also report the
matter to the Central Government for any other action which that Government may
deem fit.
(2) If
the Tribunal is satisfied on the basis of the information and evidence in its
possession with respect to any person who is or was a director or an officer or
other employee of the sick industrial company, that such person by himself or
along with others had diverted the funds or other property of such company for
any purpose other than a bona
fide purpose of the company or had
managed the affairs of the company in a manner highly detrimental to the
interests of the company, the Tribunal shall by order, direct the public
financial institutions, scheduled banks and State level institutions not to
provide, during a period of ten years from the date of the order, any financial
assistance to such person or any firm of which such person is a partner or any
company or other body corporate of which such person is a director (by
whatever name called).
(3) No
order shall be made by the Tribunal under this section against any person
unless such person has been given an opportunity for making his submissions.
(4) This
section shall apply notwithstanding that the matter is one for which the person
may be criminally liable.
424L.
(1) Whoever violates provisions of this Part
or any scheme, or any order, of the Tribunal or the Appellate Tribunal or makes
a false statement or gives false evidence to the Tribunal or the Appellate
Tribunal, and attempts to tamper the records of reference or appeal filed
under this Act, shall be punishable with simple imprisonment for a term which
may extend to three years or shall be liable to fine not exceeding ten lakh rupees.
(2) No court shall take cognizance of any
offence under sub-section (1) except on a complaint in writing of an officer of
the Tribunal or the Appellate Tribunal or any officer of the Central Government
authorised by it or any officer of an operating
agency as may be authorised in this behalf by the
Tribunal or the Appellate Tribunal, as the case may be.]
Winding UP
Preliminary
425.
(1) The winding up of a company may be either—
(a) by the [Tribunal]; or
(b) voluntary; [***]
(c) [***].
(2) The provisions of this Act with respect to winding up apply,
unless the contrary appears, to the winding up of a company in any of those
modes.
Liability
as contributories of present and past members.
426.
(1) In the event of a company being wound up, every present and
past member shall be liable to contribute to the assets of the company to an
amount sufficient for payment of its debts and liabilities and the costs,
charges and expenses of the winding up, and for the adjustment of the rights of
the contributories among themselves, subject to the provisions of section 427
and subject also to the following qualifications, namely:—
(a) a past member shall not be liable to contribute if he has
ceased to be a member for one year or upwards before the commencement of the
winding up;
(b) a past 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;
(c) no past 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;
(d) in
the case of a company limited by shares, no contribution shall be required
from any past or present member exceeding the amount, if any, unpaid on the
shares in respect of which he is liable as such member;
(e) in
the case of a company limited by guarantee, no contribution shall, subject to
the provisions of sub-section (2), be required from any past or present member
exceeding the amount undertaken to be contributed by him to the assets of the
company in the event of its being wound up;
(f) nothing
in this Act shall invalidate any provision contained in any policy of insurance
or other contract whereby the liability of individual members on the policy or
contract is restricted, or whereby the funds of the company are alone made
liable in respect of the policy or contract;
(g) a
sum due to any past or present member of the company in his character as such,
by way of dividends, profits or otherwise, shall not be deemed to be a debt of
the company payable to that member, in a case of competition between himself and
[any creditor claiming otherwise than in the character of a past or present
member of the company]; but any such sum shall be taken into account for the
purpose of the final adjustment of the rights of the contributories among
themselves.
(2) In the winding up of a company limited by guarantee which has
a share capital, every member of the company shall be liable, in addition to
the amount undertaken to be contributed by him to the assets of the company in
the event of its being wound up, to contribute to the extent of any sums unpaid
on any shares held by him as if the company were a company limited by shares.
Obligations of directors and managers whose liability is
unlimited.
427. In
the winding up of a limited company, any director [***] or manager, whether
past or present, whose liability is, under the provisions of this Act,
unlimited, shall, in addition to his liability, if any, to contribute as an
ordinary member, be liable to make a further contribution as if he were, at the
commencement of the winding up, a member of an unlimited company:
Provided that—
(a) a past director [***] or manager shall not be liable to make
such further contribution, if he has ceased to hold office for a year or
upwards before the commencement of the winding up;
(b) a
past director [***] or manager shall not
be liable to make such further contribution in respect of any debt or liability
of the company contracted after he ceased to hold office;
(c) subject
to the articles of the company, a director [***] or manager shall not be liable to make such
further contribution, unless the [Tribunal] deems it necessary to require the
contribution in order to satisfy the debts and liabilities of the company, and
the costs, charges and expenses of the winding up.
428. The
term “contributory” means every person liable to contribute to the assets of a
company in the event of its being wound up, and includes the holder of any
shares which are fully paid-up; and for the purposes of all proceedings for
determining, and all proceedings prior to the final determination of, the
persons who are to be deemed contributories, includes any person alleged to be
a contributory.
Nature of liability of contributory.
429.
(1) The liability of a contributory shall create a debt accruing
due from him at the time when his liability commenced, but payable at the times
specified in calls made on him for enforcing the liability.
(2) No claim founded on the liability of a contributory shall be
cognizable by any Court of Small Causes sitting outside the presidency-towns.
Contributories in case of death of member.
430.
(1) If a contributory dies either before or after he has been
placed on the list of contributories, his legal representatives shall be liable
in due course of administration, to contribute to the assets of the company in
discharge of his liability, and shall be contributories accordingly.
(2) If the legal representatives make default in paying any money
ordered to be paid by them, proceedings may be taken for administering the
estate of the deceased contributory and compelling payment thereout
of the money due.
(3) For the purposes of this section, where the deceased contributory
was a member of a Hindu joint family governed by the Mitakshara
School of Hindu Law, his legal representatives shall be deemed to include the
surviving coparceners.
Contributories in case of insolvency of member.
431. If a
contributory is adjudged insolvent, either before or after he has been placed
on the list of contributories,—
(a) his
assignees in insolvency shall represent him for all the purposes of the winding
up, and shall be contributories accordingly, and may be called on to admit to
proof against the estate of the insolvent, or otherwise to allow to be paid out
of his assets in due course of law, any money due from the insolvent in respect
of his liability to contribute to the assets of the company; and
(b) there may be proved against the estate of the insolvent the
estimated value of his liability to future calls as well as calls already made.
Contributories in case of winding up of a body corporate
which is a member.
432. If a
body corporate which is a contributory is ordered to be wound up, either before
or after it has been placed on the list of contributories,—
(a) the
liquidator of the body corporate shall represent it for all the purposes of the
winding up of the company and shall be a contributory accordingly, and may be
called on to admit to proof against the assets of the body corporate, or
otherwise to allow to be paid out of its assets in due course of law, any money
due from the body corporate in respect of its liability to contribute to the
assets of the company; and
(b) there may be proved against the assets of the body corporate
the estimated value of its liability to future calls as well as calls already
made.
Winding up by the [tribunal]
Cases in which company may be wound up by the
[Tribunal]
Circumstances
in which company may be wound up by Tribunal.
433. A company may be
wound up by the Tribunal,—
(a) if the company has, by special resolution,
resolved that the company be wound up by the Tribunal;
(b) if default is made in delivering the statutory
report to the Registrar or in holding the statutory meeting;
(c) if the company
does not commence its business within a year from its incorporation, or
suspends its business for a whole year;
(d) if
the number of members is reduced, in the case of a public company, below seven,
and in the case of a private company, below two;
(e) if the company is unable to pay its debts;
(f) if the Tribunal is of the opinion that it is
just and equitable that the company should be wound up;
(g) if
the company has made a default in filing with the Registrar its balance sheet and
profit and loss account or annual return for any five consecutive financial
years;
(h) if
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;
(i) if the Tribunal is of the opinion that the
company should be wound up under the circumstances specified in section 424G:
Provided that
the Tribunal shall make an order for winding up of a company under clause (h) on application made by the Central
Government or a State Government.]
Company when deemed unable to
pay its debts.
434.
(1) A company shall be deemed to be unable to pay its debts—
(a) if
a creditor, by assignment or otherwise, to whom the company is indebted in a sum
exceeding [one lakh] rupees then due, has served on the
company, by causing it to be delivered at its registered office, by registered
post or otherwise, a demand under his hand requiring the company to pay the sum
so due and the company has for three weeks thereafter neglected to pay the sum,
or to secure or compound for it to the reasonable satisfaction of the
creditor;
(b) if
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 debts,
and, in determining whether a company is unable to pay its debts, the [Tribunal] shall take into account the contingent and
prospective liabilities of the company.
(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given
under the hand of the creditor if it is signed by any agent or legal adviser
duly authorised on his behalf, or in the case of a
firm, if it is signed by any such agent or legal adviser or by any member of
the firm.
[***]
Transfer of winding up
proceedings to District Court.
435. [Omitted by the Companies (Second Amendment)
Act, 2002, w.e.f. a date yet to be notified.]
Withdrawal and transfer of winding up from one District
Court to another.
436. [Omitted by the Companies (Second Amendment)
Act, 2002, w.e.f. a date yet to be notified.]
Power of High
Court to retain winding up proceedings in District Court.
437. [Omitted by the Companies (Second Amendment)
Act, 2002, w.e.f. a date yet to be notified.]
Jurisdiction of High
Court under sections 435, 436 and 437 to be exercised at any time and at any
stage.
438. [Omitted by the Companies (Second Amendment)
Act, 2002, w.e.f. a date yet to be notified.]
Provisions
as to applications for winding up.
439.
(1) An application to the [Tribunal] for the winding up of a company shall be by petition
presented, subject to the provisions of this section,—
(a) by the
company; or
(b) by any creditor or creditors, including any contingent or
prospective creditor or creditors; or
(c) by any
contributory or contributories; or
(d) by all or any of the parties specified in clauses (a), (b) and (c),
whether together or separately; or
(e) by the
Registrar; or
(f) in a case falling under section 243, by any person authorised by the Central Government in that behalf; or
[(g) in a case
falling under clause (h) of
section 433, by the Central Government or a State Government.]
(2) A secured creditor, the holder of any debentures (including
debenture stock), whether or not any trustee or trustees have been appointed in
respect of such and other like debentures, and the trustee for the holders of
debentures, shall be deemed to be creditors within the meaning of clause (b) of sub-section (1).
(3) A contributory shall be entitled to present a petition for
winding up 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.
(4) A contributory shall not be entitled to present a petition
for winding up a company unless—
(a) either
the number of members is reduced, in the case of a public company, below seven,
and, in the case of a private company, below two; or
(b) the
shares in respect of which he is a contributory, or some of them, either were
originally allotted to him or have been held by him, and registered in his
name, for at least six months during the eighteen months immediately before the
commencement of the winding up, or have devolved on him through the death of a
former holder.
(5) Except in the case where he is authorised
in pursuance of clause (f) of
sub-section (1), the Registrar shall be entitled to present a petition for
winding up a company only on the grounds specified in [clauses (b), (c), (d), (e) [, (f) and (g)]] of section 433:
Provided that the Registrar shall not present a petition on the ground specified
in clause (e) aforesaid, unless
it appears to him either from the financial condition of the company as disclosed
in its balance sheet or from the report of [a special auditor appointed under
section 233A or an inspector] appointed under section 235 or 237, that the
company is unable to pay its debts:
Provided further that the Registrar shall obtain the previous
sanction of the Central Government to the presentation of the petition on any
of the grounds aforesaid.
(6) The Central Government shall not accord its sanction in
pursuance of the foregoing proviso, unless the company has first been afforded
an opportunity of making its representations, if any.
(7) A petition for winding up a company on the ground specified
in clause (b) of section 433
shall not be presented—
(a) except by the
Registrar or by a contributory; or
(b) before the expiration of fourteen days after the last day on which the statutory
meeting referred to in clause (b)
aforesaid ought to have been held.
(8) Before a petition for winding up 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—
(a) unless, in the opinion of the [Tribunal], there is a prima facie case for winding up the
company; and
(b) until such security for costs has been given as the [Tribunal] thinks reasonable.
Right to present winding up petition where company is
being wound up voluntarily.
440.
(1) Where a company is being wound up
voluntarily, a petition for its winding up by the Tribunal may be presented by—
(a) any person authorised
to do so under section 439; or
(b) the Official Liquidator.
(2) The Tribunal shall not make a winding up
order on a petition presented to it under sub-section (1), unless it is
satisfied that the voluntary winding up cannot be continued with due regard to the
interests of the creditors or contributories or both.
Commencement of winding up by Tribunal.
441.
(1) Where, before the presentation of a
petition for the winding up of a company by the Tribunal, a resolution has been
passed by the company for voluntary winding up, the winding up of the company
shall be deemed to have commenced at the time of the passing of the resolution,
and unless the Tribunal, on proof of fraud or mistake, thinks fit to direct
otherwise, all proceedings taken in the voluntary winding up shall be deemed to
have been validly taken.
(2) In any other case, the winding up of a
company by the Tribunal shall be deemed to commence at the time of the
presentation of the petition for the winding up.]
Levy by
way of cess and formation of Rehabilitation & Revival Fund
Levy and
collection of cess on turnover or gross receipts of
companies.
441A.
(1) There shall be levied and collected, for
the purposes of rehabilitation or revival or protection of assets of the sick
industrial company, a levy by way of cess at such
rate not less than 0.005 per cent and not more than 0.1 per cent on the value
of annual turnover of every company or its annual gross receipt, whichever is
more as the Central Government may, from time to time, specify by notification
in the Official Gazette.
(2) Every company shall pay to the Central
Government the cess referred to in sub-section (1)
within three months from the close of every financial year.
(3) Every company shall furnish, in such
form as may be prescribed, to the Central Government and the Tribunal the
details of its turnover and gross receipts with payment of cess
under sub-section (1).
(4) The Central Government may, by rules
made in this behalf, specify the manner in which the cess
shall be paid under sub-section (2).
Crediting proceeds of cess to Consolidated
Fund of
441B. The proceeds of the cess levied and collected
under section 441A shall first be credited to the Consolidated Fund of India
and the Central Government may, if Parliament by appropriation made by law in
this behalf so provides, pay to the Tribunal, from time to time, out of such
proceeds (after deducting the cost of collection), such sums of money as it may
think fit for being utilised for the purposes of the
Fund.
441C.
(1) There shall be formed for the purposes
of rehabilitation or revival or protection of assets of a sick industrial
company, a Fund to be called the Rehabilitation and Revival Fund.
(2) There shall be credited to the Fund—
(a) all amounts paid under section 441B;
(b) any amount given as grants by the Central Government for the purposes of
this Fund;
(c) any amount given to the Fund from any other
source;
(d) any income from investment of the amount in the
Fund;
(e) amount refunded by the company under section 441G.
441D. The Fund shall be
applied by the Tribunal for the purpose of—
(a) making interim
payment of workmen’s dues pending the revival or rehabilitation of the sick
industrial company; or
(b) payment of
workmen’s dues due to the workmen, referred to in sub-section (3) of section
529, of the sick industrial company; or
(c) protection of assets of sick industrial company; or
(d) revival or
rehabilitation of sick industrial company; which in the opinion of the Tribunal are necessary or
expedient for the said purposes.
Power to call for information.
441E. The Central Government or Tribunal may
require any company to furnish for the purposes of rehabilitation or revival or
protection of assets of sick industrial companies, such statistical and other
information in such form and within such period as may be prescribed.
Penalty for non-payment of cess.
441F.
(1) If any cess
payable by a company under section 441A is not paid in accordance with the
provisions of that section, it shall be deemed to be in arrears and the same
shall be recovered by the Tribunal in such manner as may be prescribed.
(2) The Tribunal may, after such inquiry as it
deems fit, impose on the company, which is in arrears under sub-section (1), a
penalty not exceeding ten times the amount in arrears :
Provided that before imposing such
penalty, such company shall be given a reasonable opportunity of being heard,
and if, after such hearing, the Tribunal is satisfied that the default was for
any good and sufficient reason, no penalty shall be imposed under this
sub-section.
Refund of fund in certain cases.
441G.
(1) Where the fund has been applied by the
Tribunal for any of the purposes specified in clauses (a) to
(d) of section 441D, such
amount of fund shall be recovered from the company after its revival or
rehabilitation or out of sale proceeds of its assets after discharging the
statutory liabilities and payment of dues to creditors.
(2) The amount
referred to in sub-section (1) shall be recovered in the manner as the Tribunal
may direct.]
Power of
Court to stay or restrain proceedings against company.
442. [Omitted by the Companies (Second Amendment)
Act, 2002, w.e.f. a date yet to be notified.]
Power of Tribunal on hearing petition.
443.
(1) On hearing a winding up petition, the
Tribunal may—
(a) dismiss it,
with or without costs; or
(b) adjourn the hearing conditionally or unconditionally; or
(c) make any interim order that it thinks fit; or
(d) make an order
for winding up the company with or without costs, or any other order that it
thinks fit:
Provided that the Tribunal shall not
refuse to make a winding up order on the ground only that the assets of the
company have been mortgaged to an amount equal to or in excess of those assets,
or that the company has no assets.
(2) Where the 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 that
other remedy.
(3) Where the petition is presented on the
ground of default in delivering the statutory report to the Registrar, or in
holding the statutory meeting, the Tribunal may—
(a) instead of
making a winding up order, direct that the statutory report shall be delivered
or that a meeting shall be held; and
(b) order the costs
to be paid by any persons who, in the opinion of the Tribunal, are responsible
for the default.
Order for winding up to be communicated to Official Liquidator
and Registrar.
444. Where the Tribunal makes an order for the
winding up of the company, the Tribunal, shall within a period not exceeding
two weeks from the date of passing of the order, cause intimation thereof to be
sent to the Official Liquidator and the Registrar.]
Copy of winding up order to be
filed with Registrar.
445.
(1) On the making of a winding up order, it
shall be the duty of the petitioner in the winding up proceedings and of the company
to file with the Registrar a certified copy of the order, within [thirty days]
from the date of the making of the order.
If default is made in complying
with the foregoing provision, the petitioner, or as the case may require, the
company, and every officer of the company who is in default, shall be
punishable with fine which may extend to [one thousand] rupees for each day
during which the default continues.
[(1A) In computing the period of [thirty days]
from the date of the making of a winding up order under sub-section (1), the
time requisite for obtaining a certified copy of the order shall be excluded.]
(2) On the filing of a certified copy of the
winding up order, the Registrar shall make a minute thereof in his books
relating to the company, and shall notify in the Official Gazette that such an
order has been made.
(3) Such order shall be deemed to be notice
of discharge to the officers and employees of the company, except when the
business of the company is continued.
Suits
stayed on winding up order.
446.
(1) When a winding up order has been made or
the Official Liquidator has
been appointed as provisional liquidator, no suit or other legal
proceeding shall be commenced, or if pending at the date of the winding up
order, shall be proceeded with, against the company, except by leave of the [Tribunal] and subject to such
terms as the [Tribunal]
may impose.
[(2) 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
(c) any application made under section 391 by or in respect of the company;
(d) any question of
priorities or any other question whatsoever, whether of law or fact, which may
relate to or arise in course of the 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 before or
after the order for the winding up of the company, or before or after the
commencement of the Companies (Amendment) Act, 1960.]
(3) [***]
[(4) Nothing in sub-section (1) or sub-section (3) shall apply to any
proceeding pending in appeal before the Supreme Court or a High Court.]
Responsibility of directors and
officers to submit to Tribunal audited books and accounts.
446A. The directors and other officers of every
company shall ensure that books of account of the company are completed and
audited up to date of winding up order made by the Tribunal and submitted to it
at the cost of the company, failing which such directors and officers shall be
liable for punishment for a term not exceeding one year and fine for an amount
not exceeding one lakh rupees.]
447. An
order for winding up a company shall operate in favour
of all the creditors and of all the contributories of the company as if it had
been made on the joint petition of a creditor and of a contributory.
[Appointment
of Official Liquidator.
448. (1) For the purposes of this Act, so far as
it relates to the winding up of a company by the Tribunal, there shall be an
Official Liquidator who—
(a) may be appointed from a panel of
professional firms of chartered accountants, advocates, company secretaries,
costs and works accountants or firms having a combination of these professions,
which the Central Government shall constitute for the Tribunal; or
(b) may be a body
corporate consisting of such professionals as may be approved by the Central
Government from time to time; or
(c) may be a whole-time
or a part-time officer appointed by the Central Government:
Provided that, before appointing the Official
Liquidator, the Tribunal may give due regard to the views or opinion of the
secured creditors and workmen.
(2) The terms and conditions for the
appointment of the Official Liquidator and the remuneration payable to him
shall be—
(a) approved by the
Tribunal for those appointed under clauses (a) and (b) of
sub-section (1), subject to a maximum remuneration of five per cent of the value of debt recovered and realisation of sale of assets;
(b) approved by the
Central Government for those appointed under clause (c) of sub-section (1) in accordance with the
rules made by it in this behalf.
(3) Where the Official Liquidator is an
officer appointed by the Central Government under clause (c) of
sub-section (1), the Central Government may also appoint, if considered
necessary, one or more Deputy Official Liquidators or Assistant Official
Liquidators to assist the Official Liquidator in the discharge of his
functions, and the terms and conditions for the appointment of such Official
Liquidators and the remuneration payable to them shall also be in accordance
with the rules made by the Central Government.
(4) All references to the “Official
Liquidator” in this Act shall be construed as reference to the Official
Liquidator specified in sub-section (1), or to the
Deputy Official Liquidator or Assistant Official Liquidator referred to in
sub-section (3), as the case may be.
(5) The amount of the remuneration payable
shall—
(a) form part of the winding up order made by the Tribunal;
(b) be treated as
first charge on the realisation of the assets and be
paid to the Official Liquidator or to the Central Government, as the case may
be.
(6) The Official Liquidator shall conduct
proceedings in the winding up of a company and perform such duties in reference
thereto as the Tribunal may specify in this behalf:
Provided that
the Tribunal may—
(a) transfer the work
assigned from one Official Liquidator to another Official Liquidator for the
reasons to be recorded in writing;
(b) remove the Official Liquidator on sufficient cause being
shown;
(c) proceed against the
Official Liquidator for professional misconduct.]
Official Liquidator to be liquidator.
449. On a
winding up order being made in respect of a company, the Official Liquidator
shall, by virtue of his office, become the liquidator of the company.
Appointment and powers of provisional liquidator.
450.
(1) At any time after the presentation of a winding up petition
and before the making of a winding up order, the [Tribunal] may appoint the
Official Liquidator to be liquidator provisionally.
(2) Before appointing a provisional liquidator, the [Tribunal] shall give notice to
the company and give 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.
(3) Where a provisional liquidator is appointed by the [Tribunal], the [Tribunal] may limit and
restrict his powers by the order appointing him or by a subsequent order; but
otherwise he shall have the same powers as a liquidator.
(4) The Official Liquidator shall cease to hold office as provisional
liquidator, and shall become the liquidator, of the company, on a winding up
order being made.
General provisions as to liquidators.
451.
(1) The liquidator shall conduct the proceedings in winding up
the company and perform such duties in reference thereto as the [Tribunal] may impose.
(2) Where the [Official
Liquidator referred to in clause (c) of sub-section (1) of section 448] becomes or acts as
liquidator, there shall be paid to the Central Government out of the assets of
the company such fees as may be prescribed.
(3) The acts of a liquidator shall be valid, notwithstanding any
defect that may afterwards be discovered in his appointment or qualification :
Provided that nothing in this sub-section shall be deemed to give validity to
acts done by a liquidator after his appointment has been shown to be invalid.
452. A
liquidator shall be described by the style of “The Official Liquidator” of the
particular company in respect of which he acts, and not by his individual name.
Receiver not to be appointed of assets with liquidator.
453. A
receiver shall not be appointed of assets in the hands of a liquidator except
by, or with the leave of, the [Tribunal].
Statement of affairs to be made to Official Liquidator.
454.
(1) Where the [Tribunal]
has made a winding up order or appointed the Official Liquidator as provisional
liquidator, unless the [Tribunal]
in its discretion otherwise orders, there shall be made out and submitted to
the Official Liquidator a statement as to the affairs of the company in the
prescribed form, verified by an affidavit, and containing the following
particulars, namely :—
(a) the
assets of the company, stating separately the cash balance in hand and at the
bank, if any, and the negotiable securities, if any, held by the company;
(b) its debts and liabilities;
(c) the
names, residences and occupations of its creditors, stating separately the
amount of secured and unsecured debts; and in the case of secured debts,
particulars of the securities given, whether by the company or an officer
thereof, their value and the dates on which they were given;
(d) the debts due to the company and the names, residences and
occupations of the persons from whom they are due and the amount likely to be realised on account thereof;
(e) such further or other information as may be prescribed, or
as the Official Liquidator may require.
(2) The statement shall be submitted and verified by one or more
of the persons who are at the relevant date the directors and by the person who
is at that date the manager, secretary or other chief officer of the company,
or by such of the persons hereinafter in this sub-section mentioned, as the
Official Liquidator, subject to the direction of the [Tribunal], may require to
submit and verify the statement, that is to say, persons—
(a) who are or have
been officers of the company;
(b) who have taken part in the formation of the company at any
time within one year before the relevant date;
(c) who are in the employment of the company, or have been in
the employment of the company within the said year, and are, in the opinion of
the Official Liquidator, capable of giving the information required;
(d) who are or have been within the said year officers of, or in
the employment of, a company which is, or within the said year was, an officer
of the company to which the statement relates.
(3) The statement shall be submitted within twenty-one days from
the relevant date, or within such extended time not exceeding three months from
that date as the Official Liquidator or the [Tribunal] may, for special reasons, appoint.
(4) Any person making, or concurring in making, the statement and
affidavit required by this section shall be allowed, and shall be paid by the
Official Liquidator or provisional liquidator, as the case may be, out of the
assets of the company, such costs and expenses incurred in and about the
preparation and making of the statement and affidavit as the Official
Liquidator may consider reasonable, subject to an appeal to the [Tribunal].
[(5) If any person, without reasonable excuse, makes default in
complying with any of the requirements of this section, he shall be punishable
with imprisonment for a term which may extend to two years, or with fine which
may extend to [one thousand] rupees for every day during which the default
continues, or with both.
(5A) The [Tribunal]
by which the winding up order is made or the provisional liquidator is
appointed, may take cognizance of an offence under sub-section (5) upon
receiving a complaint of facts constituting such an offence and trying the
offence itself in accordance with the procedure laid down in the Code of
Criminal Procedure, 1898 (5 of 1898), for the trial of summons cases by
magistrates.]
(6) Any person stating himself in writing to be a creditor or
contributory of the company shall be entitled, by himself or by his agent, at
all reasonable times, on payment of the prescribed fee, to inspect the
statement submitted in pursuance of this section, and to a copy thereof or
extract therefrom.
(7) Any person untruthfully so stating himself to be a creditor
or contributory shall be guilty of an offence under section 182 of the Indian
Penal Code (45 of 1860); and shall, on the application of the Official
Liquidator, be punishable accordingly.
(8) In this section, the expression “the relevant date” means, in
a case where a provisional liquidator is appointed, the date of his
appointment, and in a case where no such appointment is made, the date of the winding
up order.
Report by Official Liquidator.
455.
(1) In a case where a winding up order is made, the Official
Liquidator shall, as soon as practicable after receipt of the statement to be
submitted under section 454 and not later than six months from the date of the
order [or such extended period as may be allowed by the [Tribunal]], or in a case where
the [Tribunal] orders that no statement need be submitted,
as soon as practicable after the date of the order, submit a preliminary
report to the [Tribunal]—
(a) as
to the amount of capital issued, subscribed, and paid up, and the estimated
amount of assets and liabilities, giving separately, under the heading of
assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories; (iii) debts due to the company and
securities, if any, available in respect thereof; (iv) movable and immovable properties belonging to the company;
and (v) unpaid calls;
(b) if the company has failed, as to the causes of the failure;
and
(c) whether, in his opinion, further inquiry is desirable as to
any matter relating to the promotion, formation, or failure of the company, or
the conduct of the business thereof.
(2) The Official Liquidator may also, if he thinks fit, make a
further report, or further reports, stating 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].
(3) If the Official Liquidator states in any such further report
that in his opinion a fraud has been committed as aforesaid, the [Tribunal] shall have the
further powers provided in section 478.
Custody of company’s property.
456.
(1) Where a winding up order has been made or where a provisional
liquidator has been appointed, the liquidator [or the provisional liquidator, as
the case may be,] shall take into his custody or under his control, all the
property, effects and actionable claims to which the company is or appears to
be entitled.
[(1A) For the purpose of enabling the liquidator or the provisional
liquidator, as the case may be, to take into his custody or under his control,
any property, effects or actionable claims to which the company is or appears
to be entitled, the liquidator or the provisional liquidator, as the case may
be, may by writing request the Chief Presidency Magistrate or the District
Magistrate within whose jurisdiction such property, effects or actionable
claims or any books of account or other documents of the company may be found,
to take possession thereof, and the Chief Presidency Magistrate or the District
Magistrate may thereupon after such notice as he may think fit to give to any
party, take possession of such property, effects, actionable claims, books of
account or other documents and deliver possession thereof to the liquidator or
the provisional liquidator.
(1B) For the purpose of securing compliance with the provisions of
sub-section (1A), the Chief Presidency Magistrate or the District Magistrate
may take or cause to be taken such steps and use or cause to be used such force
as may in his opinion be necessary.]
(2) All the property and effects of the company shall be deemed
to be in the custody of the [Tribunal]
as from the date of the order for the winding up of the company.
457.
(1) The liquidator in a winding up by the [Tribunal] shall have power,
with the sanction of the [Tribunal],—
(a) to
institute or defend any suit, prosecution, or other legal proceeding, civil or
criminal, in the name and on behalf of the company;
(b) to carry on the business of the company so far as may be
necessary for the beneficial winding up of the company;
(c) to sell the immovable and movable 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, or to sell the same
in parcels;
[(ca) to sell whole of the undertaking of the
company as a going concern;]
(d) to raise on the security of the assets of the company any
money requisite;
(e) to do all such other things as may be necessary for winding
up the affairs of the company and distributing its assets.
(2) The liquidator in a winding up by the [Tribunal] shall have power—
(i) to do all acts and to execute, in the
name and on behalf of the company, all deeds, receipts, and other documents,
and for that purpose to use, when necessary, the company’s seal;
[(ia) to inspect the records and returns of the
company on the files of the Registrar without payment of any fee;]
(ii) to
prove, rank and claim in the insolvency of any contributory, for any balance
against his estate, and to receive dividends in the insolvency, in respect of
that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors;
(iii) to
draw, accept, make and endorse any bill of exchange, hundi
or promissory note in the name and on behalf of the company, with the same
effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or endorsed
by or on behalf of the company in the course of its business;
(iv) to
take out, in his official name, letters of administration to any deceased
contributory, and to do in his official name 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, and in all such cases,
the money due shall, for the purpose of enabling the liquidator to take out the
letters of administration or recover the money, be deemed to be due to the
liquidator himself :
Provided
that nothing herein empowered shall be deemed to affect the rights, duties and
privileges of any Administrator-General;
(v) to appoint an agent to do any business which the liquidator
is unable to do himself.
[(2A) The liquidator
shall—
(a) appoint
security guards to protect the property of the company taken into his custody
and to make out an inventory of the assets in consultation with secured
creditors after giving them notice;
(b) appoint, as the case may be, valuer, chartered surveyors or chartered accountant to
assess the value of the company’s assets within fifteen days after taking into
custody of property, assets referred to in sub-clause (a) and effects or actionable claims subject
to such terms and conditions as may be specified by the Tribunal;
(c) give an advertisement, inviting bids for
sale of the assets of the company, within fifteen days from the date of
receiving valuation report from the valuer, chartered
surveyors or chartered accountants referred to in clause (b), as the case may be.
(2B) The liquidator
shall, immediately after the order for winding up or appointing the liquidator
as provisional liquidator is made, issue a notice requiring any of the persons
mentioned in sub-section (2) of section 454, to submit and verify a statement
of the affairs of the company and such notice shall be served by the
liquidator.
(2C) The liquidator may apply to the Tribunal
for an order directing any person who, in his opinion, is competent to furnish
a statement of the affairs under sections 439A and 454 and such person shall
for the said purpose be served a notice by the liquidator in the manner as may
be prescribed.
(2D) The liquidator may, from time to time, call
any person for recording any statement for the purpose of investigating the
affairs of the company which is being wound up and it shall be the duty of
every such person to attend to the liquidator at such time and place as the
liquidator may appoint and give the liquidator all information which he may
require and answer all such questions relating to winding up of company as may
be put to him by the liquidator.
(2E) Every bidder shall, in response to
advertisement referred to in clause (c) of sub-section (2A),
deposit, his offer in the manner as may be prescribed, with liquidator or
provisional liquidator, as the case may be, within forty-five days from the
date of the advertisement and the liquidator or provisional liquidator shall
permit inspection of property and assets in respect of which bids were invited :
Provided that such bid may be withdrawn
within three days before the last day of closing of the bid :
Provided further that
the inspection of property shall be open for not more than five days before
closing of the bid.
(2F) The advertisement
inviting bids shall contain the following details, namely:—
(a) name, address of registered office of
the company and its branch offices, factories and plants and the place where
assets of the company are kept and available for sale;
(b) last date for
submitting bids which shall not exceed ninety days from the date of
advertisement;
(c) time during
which the premises of the company shall remain open for inspection;
(d) the last date for withdrawing the bid;
(e) financial
guarantee which shall not be less than one-half of the value of the bid;
(f) validity period of the bids;
(g) place and date of opening of the bids in public;
(h) reserve price
and earnest money to be deposited along with the bid;
(i) any other terms and conditions of sale which may be
prescribed.
(2G) The liquidator
appointed shall—
(a) maintain a
separate bank account for each company under his charge for depositing the sale
proceeds of the assets and recovery of debts of each company;
(b) maintain proper
books of account in respect of all receipts and payments made by him in respect
of each company and submit half yearly return of receipts and payments to the
Tribunal.]
(3) The exercise by the liquidator in a winding up by the [Tribunal] of the powers
conferred by this section shall be subject to the control of the [Tribunal]; and any creditor or
contributory may apply to the [Tribunal]
with respect to the exercise or proposed exercise of any of the powers
conferred by this section.
458. The [Tribunal] may, by order,
provide that the liquidator may exercise any of the powers referred to in
sub-section (1) of section 457 without the sanction or intervention of the [Tribunal] :
Provided always that the exercise by the liquidator of
such powers shall be subject to the control of the [Tribunal].
Exclusion of certain time in computing periods of
limitation.
458A. Notwithstanding
anything in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for
the time being in force, in computing the period of limitation prescribed for
any suit or application in the name and on behalf of a company which is being
wound up by the 2[Tribunal], the period from the
date of commencement of the winding up of the company to the date on which the
winding up order is made (both inclusive) and a period of one year immediately
following the date of the winding up order shall be excluded.]
Provision for legal assistance to liquidator.
459. The liquidator may, with the sanction of the
Tribunal, appoint one or more chartered accountants or company secretaries or
cost accountants or legal practitioners entitled to appear before the Tribunal
under section 10GD to assist him in the performance of his duties.]
Exercise and control of liquidator’s powers.
460.
(1) Subject to the provisions of this Act, the liquidator shall,
in the administration of the assets of the company and the distribution thereof
among its creditors, have regard to any directions which may be given by
resolution of the creditors or contributories at any general meeting or by the
committee of inspection.
(2) Any directions given by the creditors or contributories at
any general meeting shall, in case of conflict, be deemed to override any
directions given by the committee of inspection.
(3) The liquidator—
(a) may summon general meetings of the creditors or
contributories, whenever he thinks fit, for the purpose of ascertaining their
wishes;
(b) shall summon such meetings at such times, as the creditors
or contributories, as the case may be, may, by resolution, direct, or whenever
requested in writing to do so by not less than one-tenth in value of the
creditors or contributories, as the case may be.
(4) The liquidator may apply to the [Tribunal] in the manner
prescribed, if any, for directions in relation to any particular matter arising
in the winding up.
(5) Subject to the provisions of this Act, the liquidator shall
use his own discretion in the administration of the assets of the company and
in the distribution thereof among the creditors.
(6) Any person aggrieved by any act or decision of the liquidator
may apply to the [Tribunal];
and the [Tribunal]
may confirm, reverse or modify the act or decision complained of, and make such
further order as it thinks just in the circumstances.
Books to be kept by liquidator.
461.
(1) The liquidator shall keep, in the manner prescribed, proper
books in which he shall cause entries or minutes to be made of proceedings at
meetings and of such other matters as may be prescribed.
(2) Any creditor or contributory may, subject to the control of
the [Tribunal],
inspect any such books, personally or by his agent.
Audit of liquidator’s accounts.
462.
(1) The liquidator shall, at such times as may be prescribed but
not less than twice in each year during his tenure of office, present to the [Tribunal] an account of his
receipts and payments as liquidator.
(2) The account shall be in the prescribed form, shall be made in
duplicate, and shall be verified by a declaration in the prescribed form.
(3) The [Tribunal]
shall cause the account to be audited in such manner as it thinks fit; and for
the purpose of the audit, the liquidator shall furnish the [Tribunal] with such vouchers
and information as the [Tribunal]
may require, and the [Tribunal]
may, at any time, require the production of, and inspect, any books or accounts
kept by the liquidator.
(4) When the account has been audited, one copy thereof shall be
filed and kept by the [Tribunal], and the other copy
shall be delivered to the Registrar for filing; and each copy shall be open to
the inspection of any creditor, contributory or person interested.
[(4A) Where an account referred to in sub-section (4) relates to a
Government company in liquidation, the liquidator shall forward a copy
thereof,—
(a) to the Central Government, if that Government is a member of
the Government company; or
(b) to any State Government, if that Government is a member of
the Government company; or
(c) to the Central Government and any State Government, if both
the Governments are members of the Government company.]
(5) The liquidator shall cause the account when audited or a
summary thereof to be printed, and shall send a printed copy of the account or
summary by post to every creditor and to every contributory :
Provided that the [Tribunal] may in any case dispense with compliance with
this sub-section.
Control of Central Government over liquidators.
463.
(1) The Central Government shall take cognizance of the conduct
of liquidators of companies which are being wound up by the [Tribunal], and, if a liquidator does not faithfully
perform his duties and duly observe all the requirements imposed on him by this
Act, [or by the Indian Companies Act, 1913 (7 of 1913)], the rules thereunder, or otherwise, with respect to the performance
of his duties, or if any complaint is made to the Central Government by any
creditor or contributory in regard thereto, the Central Government shall
inquire into the matter, and take such action thereon as it may think
expedient :
[Provided
that where the winding up of a company has commenced before the commencement of
this Act, the [Tribunal] may, on the application
of the Central Government, appoint in place of such liquidator the Official
Liquidator as the liquidator in such winding up.]
(2) The Central Government may at any time require any liquidator
of a company which is being wound up by the [Tribunal] to answer any inquiry in relation to any
winding up in which he is engaged, and may, if the Central Government thinks
fit, apply to the [Tribunal]
to examine him or any other person on oath concerning the winding up.
(3) The Central Government may also direct a local investigation
to be made of the books and vouchers of the liquidators.
Appointment
and composition of committee of inspection.
464.
[(1)
(a) The [Tribunal] may, at the time of making
an order for the winding up of a company or at any time thereafter, direct that
there shall be appointed a committee of inspection to act with the liquidator.
(b) Where a direction
is given by the [Tribunal]
as aforesaid, the liquidator shall, within two months from the date of such
direction, convene a
meeting of the creditors of the company (as ascertained from its books and
documents) for the purpose of determining who are to be members of the
committee.
[(2) The liquidator shall, within fourteen days from the date of the
creditors’ meeting or such further time as the [Tribunal] in its discretion may grant for the purpose,
convene a meeting of the contributories to consider the decision of the
creditors’ meeting with respect to the membership of the committee; and it
shall be open to the meeting of the contributories to accept the decision of
the creditors’ meeting with or without modifications or to reject it.]
(3) Except in the case where the meeting of the contributories
accepts the decision of the creditors’ meeting in its entirety, it shall be the
duty of the liquidator to apply to the [Tribunal] for directions as to [***] what the composition
of the committee shall be, and who shall be members thereof.
Constitution and proceedings of committee of inspection.
465.
(1) A committee of inspection appointed in pursuance of section
464 shall consist of not more than twelve members, being creditors and
contributories of the company or persons holding general or special powers of
attorney from creditors or contributories, in such proportions as may be
agreed on by the meetings of creditors and contributories, or in case of
difference of opinion between the meetings, as may be determined by the [Tribunal].
(2) The committee of inspection shall have the right to inspect
the accounts of the liquidator at all reasonable times.
(3) The committee shall meet at such times as it may from time to
time appoint, [***] and the liquidator or any member of the committee may also
call a meeting of the committee as and when he thinks necessary.
(4) The quorum for a meeting of the committee shall be one-third
of the total number of the members, or two, whichever is higher.
(5) The committee may act by a majority of its members present at
a meeting, but shall not act unless a quorum is present.
(6) A member of the committee may resign by notice in writing
signed by him and delivered to the liquidator.
(7) If a member of the committee is adjudged an insolvent, or
compounds or arranges with his creditors, or is absent from five consecutive
meetings of the committee without the leave of those members who, together with
himself, represent the creditors or contributories, as the case may be, his
office shall become vacant.
(8) A member of the committee may be removed at a meeting of
creditors if he represents creditors, or at a meeting of contributories if he
represents contributories,
by an ordinary resolution of which seven days’ notice has been
given, stating the object of the meeting.
(9) On a vacancy occurring in the committee, the liquidator shall
forthwith summon a meeting of creditors or of contributories, as the case may
require, to fill the vacancy; and the meeting may, by resolution, reappoint the
same, or appoint another, creditor or contributory to fill the vacancy:
Provided that if the liquidator, having regard to the position in the winding
up, is of the opinion that it is unnecessary for the vacancy to be filled, he
may apply to the [Tribunal]
and the [Tribunal]
may make an order that the vacancy shall not be filled, or shall not be filled
except in such circumstances as may be specified in the order. Unnati1
(10) The continuing members of the committee, if not less than two,
may act notwithstanding any vacancy in the committee.
General powers of
[Tribunal] in case of winding up by [Tribunal]
Power of Tribunal to stay
winding up.
466.
(1) The Tribunal may at any time after
making a winding up order, on the application either of the Official Liquidator
or of any creditor or contributory, and on proof to the satisfaction of the
Tribunal that all proceedings in relation to the winding up ought to be stayed,
make an order staying the proceedings, either altogether or for a limited time,
on such terms and conditions as the Tribunal thinks fit.
(2) On any application under this section,
the Tribunal may, before making an order, require the Official Liquidator to
furnish to the Tribunal a report with respect to any facts or matters which are
in his opinion relevant to the application.
(3) A copy of every order made under this
section shall forthwith be forwarded by the company, or otherwise as may be
prescribed, to the Registrar, who shall make a minute of the order in his books
relating to the company.]
Settlement of list of contributories and application of
assets.
467.
(1) As soon as may be after making a winding up order, the [Tribunal] shall settle a list
of contributories, with power to rectify the 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 collected and applied in discharge of its
liabilities :
Provided that, where it appears to the [Tribunal] that it will 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.
(2) 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.
Delivery of property to liquidator.
468. The [Tribunal] may, at any time
after making 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 liquidator, any money, property
or books and papers [in his custody or under his control] to which the company
is prima facie entitled.
Payment of debts due by
contributory and extent of set-off.
469.
(1) The [Tribunal]
may, at any time after making a winding up order, make an order on any contributory
for the time being on the list of contributories to pay, in the manner directed
by the order, any money due to the company, from him or from the estate of the
person whom he represents, exclusive of any money payable by him or the estate
by virtue of any call in pursuance of this Act.
(2) The [Tribunal],
in making such an order, may—
(a) in
the case of an unlimited company, allow to the contributory, by way of set-off,
any money due to him or to the estate which he represents, from the company, on
any independent dealing or contract with the company, but not any money due to
him as a member of the company in respect of any dividend or profit; and
(b) in the case of a limited company, make to any director [***]
or manager whose liability is unlimited, or to his estate, the like
allowance.
(3) In the case of any company, whether limited or unlimited,
when all the creditors have been paid in full, any money due on any account
whatever to a contributory from the company may be allowed to him by way of
set-off against any subsequent call.
Power of Tribunal to make calls.
470.
(1) The Tribunal may, at any time after
making winding up order, and either before or after it has ascertained the
sufficiency of the assets of the company,—
(a) make calls on all or any of the
contributories for the time being on the list of the contributories, to the
extent of their liability, for payment of any money which the Tribunal
considers necessary to satisfy the debts and liabilities of the company, and the
costs, charges and expenses of winding up, and for the adjustment of the rights
of the contributories among themselves; and
(b) make an order for payment of any calls so made.
(2) In making a call, the Tribunal may take
into consideration the probability that some of the contributories may, partly
or wholly, fail to pay the call.]
Payment into bank of moneys due to company.
471.
(1) The [Tribunal]
may order any contributory, purchaser or other person from whom any money is due
to the company to pay the money into the public account of
(2) Any such order may be enforced in the same manner as if the [Tribunal] had directed payment to the liquidator.
Moneys and securities paid into bank to be subject to
order of Tribunal.
472. All moneys, bills, hundis,
notes and other securities paid or delivered into the Reserve Bank of
Order on contributory to be conclusive evidence.
473.
(1) An order made by the [Tribunal] on a contributory shall, subject to any right
of appeal, be conclusive evidence that the money, if any, thereby appearing to
be due or ordered to be paid is due.
(2) All other pertinent matters stated in the order shall be
taken to be truly stated as against all persons and in all proceedings
whatsoever.
Power to exclude creditors not proving in time.
474. The [Tribunal] may fix a time or
times within which creditors are to prove their debts or claims, or to be
excluded from the benefit of any distribution made before those debts or
claims are proved.
Adjustment of rights of contributories.
475. The [Tribunal] shall adjust the
rights of the contributories among themselves, and distribute any surplus among
the persons entitled thereto.
476. The [Tribunal] may, in the event of
the assets being insufficient to satisfy the liabilities, make an order for the
payment out of the assets, of the costs, charges and expenses incurred in the
winding up, in such order of priority inter
se as the [Tribunal]
thinks just.
Power to summon persons
suspected of having property of company, etc.
477.
(1) The [Tribunal]
may, at any time after the appointment of a provisional liquidator or the
making of a winding up order, summon before it any officer of the company or
person known or suspected to have in his possession any property or books or
papers, of the company, or known or suspected to be indebted to the company, or
any person whom the [Tribunal]
deems capable of giving information concerning the promotion, formation, trade,
dealings, property, books or papers, or affairs of the company.
(2) The [Tribunal]
may examine any officer or person so summoned on oath concerning the matters
aforesaid, either by word of mouth or on written interrogatories; and may, in
the former case, reduce his answers to writing and require him to sign them.
(3) The [Tribunal]
may require any officer or person so summoned to produce any books and papers
in his custody or power relating to the company; but, where he claims any lien
on books or papers produced by him, the production shall be without prejudice
to that lien, and the [Tribunal]
shall have jurisdiction in the winding up to determine all questions relating
to that lien.
(4) If any officer or person so summoned, after being paid or
tendered a reasonable sum for his expenses, fails to appear before the [Tribunal] at the time
appointed, not having a lawful impediment (made known to the [Tribunal] at the time of its
sitting and allowed by it), the [Tribunal]
may cause him to be apprehended and brought before the [Tribunal] for examination.
[(5) If, on his examination, any officer or person so summoned
admits that he is indebted to the company, the [Tribunal] may order him to pay to the provisional
liquidator or, as the case may be, the liquidator at such time and in such
manner as to the [Tribunal]
may seem just, the amount in which he is indebted, or any part thereof, either
in full discharge of the whole amount or not, as the [Tribunal] thinks fit, with or
without costs of the examination.
(6) If, on his examination, any such officer or person admits
that he has in his possession any property belonging to the company, the [Tribunal] may order him to
deliver to the provisional liquidator or, as the case may be, the liquidator,
that property or any part thereof, at such time, in such manner and on such
terms as to the [Tribunal]
may seem just.
(7) Orders made under sub-sections (5) and (6) shall be executed
in the same manner as decrees for the payment of money or for the delivery of
property under the Code of Civil Procedure, 1908 (5 of 1908), respectively.
(8) Any person making any payment or delivery in pursuance of an
order made under sub-section (5) or sub-section (6) shall by such payment or
delivery be, unless otherwise directed by such order, discharged from all
liability whatsoever in respect of such debt or property.]
Power to order public examination of promoters, directors,
etc.
478.
(1) When an order has been made for winding up a company by the [Tribunal], and the Official
Liquidator has made a report to the [Tribunal] under this Act, stating that in his opinion a
fraud has been committed by any person in the promotion or formation of the
company, or by any officer of the company in relation to the company since its
formation, the [Tribunal]
may, after considering the report, direct that that person or officer shall
attend before the [Tribunal]
on a day appointed by it for that purpose, and be publicly examined as to
the promotion or formation or the conduct of the business of the company, or as
to his conduct and dealings as an officer thereof.
(2) The Official Liquidator shall take part in the examination,
and for that purpose may, if specially authorized by the [Tribunal] in that behalf,
employ such legal assistance as may be sanctioned by the [Tribunal].
(3) Any creditor or contributory may also take part in the examination
either personally or by any [chartered
accountants or company secretaries or cost accountants or legal practitioners
entitled to appear before the Tribunal under section 10GD].
(4) The [Tribunal] may put such questions to the person examined as it thinks fit.
(5) The person examined shall be examined on oath, and shall
answer all such questions as the [Tribunal]
may put, or allow to be put, to him.
(6) A person ordered to be examined under this section—
(a) shall, before his examination, be furnished at his own cost
with a copy of the Official Liquidator’s report; and
(b) may
at his own cost employ [chartered
accountants or company secretaries or cost accountants or legal practitioners
entitled to appear before the Tribunal under section 10GD], who
shall be at liberty to put to him such questions as the [Tribunal] may deem just for
the purpose of enabling him to explain or qualify any answers given by him.
(7)
(a) If any such
person applies to the [Tribunal]
to be exculpated from any charges made or suggested against him, it shall be
the duty of the Official Liquidator to appear on the hearing of the application
and call the attention of the Tribunal]
to any matters which appear to the Official Liquidator to be relevant.
(b) If the [Tribunal], after hearing any
evidence given or witnesses called by the Official Liquidator, grants the
application, the [Tribunal]
may allow the applicant such costs as it may think fit.
(8) Notes of the examination shall be taken down in writing, and
shall be read over to or by, and signed by, the person examined; and may
thereafter be used in evidence against him, and shall be open to the inspection
of any creditor or contributory at all reasonable times.
(9) The [Tribunal]
may, if it thinks fit, adjourn the examination from time to time.
[(10) An examination under this section may, if
the Tribunal so directs, be held before any person or authority authorised by the Tribunal.]
(11) The powers of the [Tribunal] under this section as to the conduct of the
examination, but not as to costs, may be exercised by the [person or authority] before
whom the examination is held in pursuance of sub-section (10).
Power to arrest absconding contributory.
479. At
any time either before or after making a winding up order, the [Tribunal] may, on proof of probable cause for
believing that a contributory is about to quit India or otherwise to abscond,
or is about to remove or conceal any of his property, for the purpose of
evading payment of calls or of avoiding examination respecting the affairs of
the company, cause—
(a) the contributory to
be arrested and safely kept until such time as the [Tribunal] may order; and
(b) his books and papers and movable property to be seized and
safely kept until such time as the [Tribunal] may order.
Saving of existing powers of Tribunal.
480. Any powers conferred on the Tribunal by this
Act shall be in addition to, and not in derogation of, any existing powers of
instituting proceedings against any contributory or debtor of the company, or
the estate of any contributory or debtor, for the recovery of any call or other
sums.]
481.
(1) When the affairs of a company have been completely wound up
[or when the [Tribunal]
is of the opinion that the liquidator cannot proceed with the winding up of a
company for want of funds and assets or for any other reason whatsoever and it
is just and reasonable in the circumstances of the case that an order of
dissolution of the company should be made], the [Tribunal] shall make an order that the company be
dissolved from the date of the order, and the company shall be dissolved
accordingly.
(2) A copy of the order shall, within [thirty] days from the date
thereof, be forwarded by the liquidator to the Registrar who shall make in his
books a minute of the dissolution of the company.
(3) If the liquidator makes default in forwarding a copy as
aforesaid, he shall be
punishable with fine which may extend to [five hundred] rupees
for every day during which the default continues.
Enforcement of and appeal from orders
Order made in any Court to be
enforced by other Courts.
482. Any
order made by a Court for, or in the course of, winding up a company shall be
enforceable at any place in India, other than that over which such Court has
jurisdiction, by the Court which would have had jurisdiction in respect of the
company if its registered office had been situate at such other place, and in
the same manner in all respects as if the order had been made by that Court.
483. Appeals
from any order made, or decision given [before the commencement of the Companies (Second Amendment) Act, 2002]
in the matter of the winding up of a company by the Court shall lie to the same
Court to which, in the same manner in which, and subject to the same conditions
under which, appeals lie from any order or decision of the Court in cases
within its ordinary jurisdiction.
Voluntary
Winding Up
Resolutions for, and commencement of,
voluntary winding up
Circumstances
in which company may be wound up voluntarily.
484.
(1) A company may be wound up voluntarily—
(a) when
the period, if any, fixed for the duration of the company by the articles has expired,
or the event, if any, has occurred, on the occurrence of which the articles
provide that the company is to be dissolved, and the company in general meeting
passes a resolution requiring the company to be wound up voluntarily;
(b) if the company passes a special resolution that the company
be wound up voluntarily.
(2) In this Act, the expression “a resolution for voluntary
winding up” means a resolution passed under clause (a) or (b) of
sub-section (1).
Publication of resolution to wind up voluntarily.
485.
(1) When a company has passed a resolution for voluntary winding
up, it shall, within fourteen days of the passing of the resolution, give
notice of the resolution by advertisement in the Official Gazette, and also in
some newspaper circulating in the district where the registered office of the
company is situate.
(2) If default is made in complying with sub-section (1), the
company, and every officer of the company who is in default, shall be
punishable with fine which may extend to [five hundred] rupees for every day
during which the default continues.
For the purposes of this sub-section, a
liquidator of the company shall be deemed to be an officer of the company.
Commencement of voluntary winding up.
486. A
voluntary winding up shall be deemed to commence at the time when the
resolution for voluntary winding up is passed.
Consequences of voluntary
winding up
Effect of
voluntary winding up on status of company.
487. In the case of
a voluntary winding up, the company shall, from the commencement of the winding
up, cease to carry on its business, except so far as may be required for the
beneficial winding up of such business :
Provided that the corporate state and corporate powers of the company shall
continue until it is dissolved.
Declaration
of solvency in case of proposal to wind up voluntarily.
488.
(1) Where it is proposed to wind up a company voluntarily, its
directors, or in case the company has more than two directors, the majority of
the directors, may, at a meeting of the Board, make a declaration verified by
an affidavit, to the effect that they have made a full inquiry into the affairs
of the company, and that, having done so, they have formed the opinion that
the company has no debts, or that it will be able to pay its debts in full
within such period not exceeding three years from the commencement of the
winding up as may be specified in the declaration.
(2) A declaration made as aforesaid shall have no effect for the
purposes of this Act, unless—
(a) it
is made within the five weeks immediately preceding the date of the passing of
the resolution for winding up the company and is delivered to the Registrar for
registration before that date; and
[(b) it
is accompanied by a copy of the report of the auditors of the company
(prepared, as far as circumstances admit, in accordance with the provisions of
this Act) on the profit and loss account of the company for the period
commencing from the date up to which the last such account was prepared and
ending with the latest practicable date immediately before the making of the
declaration and the balance sheet of the company made out as on the
last-mentioned date and also embodies a statement of the company’s assets and
liabilities as at that date.]
(3) Any director of a company making a declaration under this
section without having reasonable grounds for the opinion that the company will
be able to pay its debts in full within the period specified in the
declaration, shall be punishable with imprisonment for a term which may extend
to six months, or with fine which may extend to [fifty] thousand rupees, or
with both.
(4) If the company is wound up in pursuance of a resolution
passed within the period of five weeks after the making of the declaration, but
its debts are not paid or provided for in full within the period specified in
the declaration, it shall be presumed, until the contrary is shown, that the
director did not have reasonable grounds for his opinion.
(5) A winding up in the case of which a declaration has been made
and delivered in accordance with this section is in this Act referred to as “a
members’ voluntary winding up”; and a winding up in the case of which a declaration
has not been so made and delivered is in this Act referred to as “a creditors’
voluntary winding up”.
Provisions applicable to a members’ voluntary winding up.
489. The provisions
contained in sections 490 to 498, both inclusive, shall subject to the
provisions of section 498, apply in relation to a members’ voluntary winding
up.
Power of company to appoint and fix remuneration of
liquidators.
490.
(1) The company in general meeting shall—
(a) appoint one or more liquidators for the purpose of winding
up the affairs and distributing the assets of the company; and
(b) fix the remuneration, if any, to be paid to the liquidator
or liquidators.
(2) Any remuneration so fixed shall not be increased in any
circumstances whatever, whether with or without the sanction of the [Tribunal].
(3) Before the remuneration of the liquidator or liquidators is
fixed as aforesaid, the liquidator, or any of the liquidators, as the case may
be, shall not take charge of his office.
Board’s powers to cease on appointment of liquidator.
491. On
the appointment of a liquidator, all the powers of the Board of directors and
of the managing or whole-time directors [***] and manager, if there be any of
these, shall cease, except for the purpose of giving notice of such appointment
to the Registrar in pursuance of section 493 or in so far as the company in
general meeting or the liquidator may sanction the continuance thereof.
Power to fill vacancy in office of liquidator.
492.
(1) If a vacancy occurs by death, resignation or otherwise in the
office of any liquidator appointed by the company, the company in general
meeting may, subject to any arrangement with its creditors, fill the vacancy.
(2) For that purpose, a general meeting may be convened by any
contributory, or by the continuing liquidator or liquidators, if any.
(3) The meeting shall be held in the manner provided by this Act
or by the articles, or in such other manner as the [Tribunal] may, on application
by any contributory or by the continuing liquidator or liquidators, determine.
Notice of appointment of liquidator to be given to
Registrar.
493.
(1) The company shall give notice to the Registrar of the
appointment of a liquidator or liquidators made by it, under section 490, of
every vacancy occurring in the office of liquidator, and of the name of the
liquidator or liquidators appointed to fill every such vacancy under section
492.
(2) The notice aforesaid shall be given by the company within ten
days of the event to which it relates.
(3) If default is made in complying with sub-section (1) or (2),
the company, and every officer of the company (including every liquidator or
continuing liquidator) who is in default, shall be punishable with fine which
may extend to [one thousand] rupees for every day during which the
default continues.
Power
of liquidator to accept shares, etc., as consideration for sale of property of
company.
494.
(1) Where—
(a) a company (in this section called “the transferor company”)
is proposed to be, or is in course of being, wound up altogether voluntarily;
and
(b) the whole or any part of its business or property is proposed to be transferred or sold to another company, whether a company within the meaning of this Act or not (in this section called “the transferee company”); the liquidator of the transferor company may, with the sanction of a special resolution of that company conferring on the liquidator either a general authority or an authority in respect of any particular arrangement,—
(i) receive, by way of compensation or part
compensation for the transfer or sale, shares, policies, or other like interests
in the transferee company, for distribution among the members of the
transferor company; or
(ii) enter into any other arrangement whereby the members of the
transferor company may, in lieu of receiving cash, shares, policies, or other
like interests or in addition thereto, participate in the profits of, or
receive any other benefit from, the transferee company.
(2) Any sale or arrangement in pursuance of this section shall be
binding on the members of the transferor company.
(3) If any member of the transferor company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the liquidator, and left
at the registered office of the company within seven days after the passing of
the resolution, he may require the liquidator either—
(a) to abstain from
carrying the resolution into effect; or
(b) to purchase his interest at a price to be determined by
agreement, or by arbitration in the manner provided by this section.
(4) If the liquidator elects to purchase the member’s interest,
the purchase money shall be paid before the company is dissolved, and be raised
by the liquidator in such manner as may be determined by special resolution.
(5) A special resolution shall not be
invalid for the purposes of this section by reason only that it is passed
before or concurrently with a resolution for voluntary winding up or for
appointing liquidators; but if an order is made within a year for winding up
the company by [the Tribunal], the special resolution shall not be valid unless it is sanctioned by
the [Tribunal].
(6) The provisions of the Arbitration Act, 1940 (10 of 1940),
other than those restricting the application of that Act in respect of the
subject-matter of the arbitration, shall apply to all arbitrations in pursuance
of this section.
Duty of liquidator to call creditors’ meeting in case of
insolvency.
495.
(1) If, in the case of a winding up commenced after the
commencement of this Act, the liquidator is at any time of opinion that the
company will not be able to pay its debts in full within the period stated in
the declaration under section 488, or that period has expired without the debts
having been paid in full, he shall forthwith summon a meeting of the creditors,
and shall lay before the meeting a statement of the assets and liabilities of
the company.
(2) If the liquidator fails to comply with sub-section (1), he
shall be punishable with fine which may extend to [five thousand] rupees.
Duty of liquidator to call general meeting at end of each
year.
496.
(1) Subject to the provisions of section 498, in the event of the
winding up continuing for more than one year, the liquidator shall—
(a) call
a general meeting of the company at the end of the first year from the
commencement of the winding up, and at the end of each succeeding year, or as soon
thereafter as may be convenient within three months from the end of the year or
such longer period as the Central Government may allow; and
(b) lay
before the meeting an account of his acts and dealings and of the conduct of
the winding up during the preceding year, together with a statement in the
prescribed form and containing the prescribed particulars with respect to the
proceedings in, and position of, the liquidation.
(2) If the liquidator fails to comply with sub-section (1), he
shall be punishable, in respect of each failure, with fine which may extend to
[one thousand] rupees.
Final meeting and dissolution.
497.
(1) Subject to the provisions of section 498, as soon as the
affairs of the company are fully wound up, the liquidator shall—
(a) make
up an account of the winding up, showing how the winding up has been conducted
and the property of the company has been disposed of; and
(b) call a general meeting of the company for the purpose of
laying the account before it, and giving any explanation thereof.
(2) The meeting shall be called by advertisement—
(a) specifying the
time, place and object of the meeting; and
(b) published not less than one month before the meeting in the
Official Gazette, and also in some newspaper circulating in the district where
the registered office of the company is situate.
(3) Within one week after the meeting, the liquidator shall send
to the [Registrar
and the Official Liquidator [referred
to in clause (c) of sub-section
(1) of section 448] a copy each of the account and shall make a
return to each of them] of the holding of the meeting and of the date thereof.
If the copy is not so sent or the return is
not so made, the liquidator shall be punishable with fine which may extend to
[five hundred] rupees for every day during which the default continues.
(4) If a quorum is not present at the meeting aforesaid, the
liquidator shall, in lieu of the return referred to in sub-section (3), make a
return that the meeting was duly called and that no quorum was present thereat.
Upon such a return being made within one week
after the date fixed for the meeting, the provisions of sub-section (3) as to
the making of the return shall be deemed to have been complied with.
[(5) The Registrar, on receiving the account and either the return
mentioned in sub-section (3) or the return mentioned in sub-section (4), shall
forthwith register them.
(6) The Official Liquidator [referred to in clause (c)
of sub-section (1) of section 448], on receiving the account and
either the return mentioned in sub-section (3) or the return mentioned in
sub-section (4), shall, as soon as may be, make, and the liquidator and all
officers, past or present, of the company shall give the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
all reasonable facilities to make, a scrutiny of the books and papers of the
company and if on such scrutiny the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
makes a report to the [Tribunal]
that the affairs of the company have not been conducted in a manner prejudicial
to the interests of its members or to public interest, then, from the date of
the submission of the report to the [Tribunal] the company shall be deemed to be dissolved.]
(6A) If on such scrutiny the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
makes a report to the [Tribunal]
that the affairs of the company have been conducted in a manner prejudicial
as aforesaid, the [Tribunal]
shall by order direct the Official Liquidator [referred to in clause (c)
of sub-section (1) of section 448] to make a further
investigation of the affairs of the company and for that purpose shall invest
him with all such powers as the [Tribunal]
may deem fit.
(6B) On the receipt of the report of the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
on such further investigation the [Tribunal] may either make an order that the company
shall stand dissolved with effect from the date to be specified by the [Tribunal] therein or make such
other order as the circumstances of the case brought out in the report permit.]
(7) If the liquidator fails to call a general meeting of the company
as required by this section, he shall be punishable with fine which may extend
to [five thousand] rupees.
Alternative provisions as to annual and final meetings in
case of insolvency.
498. Where
section 495 has effect, sections 508 and 509 shall apply to the winding up, to
the exclusion of sections 496 and 497, as if the winding up were a creditors’
voluntary winding up and not a members’ voluntary winding up
:
Provided that the liquidator shall not be required to call a meeting of
creditors under section 508 at the end of the first year from the commencement
of the winding up, unless the meeting held under section 495 has been held more
than three months before the end of that year.
Provisions applicable to a creditors’ voluntary winding
up.
499. The
provisions contained in sections 500 to 509, both inclusive, shall apply in
relation to a creditors’ voluntary winding up.
500.
(1) The company shall cause a meeting of the creditors of the
company to be called for the day, or the day next following the day, on which
there is to be held the general meeting of the company at which the resolution
for voluntary winding up is to be proposed, and shall cause notices of the
meeting of creditors to be sent by post to the creditors simultaneously with
the sending of the notices of the meeting of the company.
(2) The company shall cause notice of the meeting of the creditors
to be advertised once at least in the Official Gazette and once at least in two
news-papers circulating in the district where the registered office or
principal place of business of the company is situate.
(3) The Board of directors of the company shall —
(a) cause
a full statement of the position of the company’s affairs together with a list
of the creditors of the company and the estimated amount of their claims to be
laid before the meeting of the creditors to be held as aforesaid; and
(b) appoint one of
their number to preside at the said meeting.
(4) It shall be the duty of the director appointed to preside at
the meeting of creditors to attend the meeting and preside thereat.
(5) If the meeting of the company at which the resolution for
voluntary winding up is to be proposed is adjourned and the resolution is
passed at an adjourned meeting, any resolution passed at the meeting of the
creditors held in pursuance of sub-section (1) shall have effect as if it had
been passed immediately after the passing of the resolution for winding up the
company.
(6) If default is made—
(a) by the company, in complying with sub-sections (1) and (2);
(b) by its Board of directors, in complying with sub-section
(3);
(c) by
any director of the company, in complying with sub-section (4); the company, each of the
directors, or the director, as the case may be, shall be punishable with fine which may extend
to [ten] thousand rupees and, in the case of default by the company, every
officer of the company who is in default, shall be liable to the like
punishment.
Notice of resolutions passed by creditors’ meeting to be
given to Registrar.
501.
(1) Notice of any resolution passed at a creditors’ meeting in
pursuance of section 500 shall be given by the company to the Registrar within
ten days of the passing thereof.
(2) If default is made in complying with sub-section (1), the
company, and every officer of the company who is in default, shall be
punishable with fine which may extend to [five hundred] rupees for every day
during which the default continues.
For the purposes of this section, a liquidator
of the company shall be deemed to be an officer of the company.
502.
(1) The creditors and the company at their respective meetings
mentioned in section 500 may nominate a person to be liquidator for the
purpose of winding up the affairs and distributing the assets of the company.
(2) If the creditors and the company nominate different persons
the person nominated by the creditors shall be liquidator:
Provided that any director, member or creditor of the company may, within seven
days after the date on which the nomination was made by the creditors, apply to
the [Tribunal]
for an order either directing that the person nominated as liquidator by the
company shall be liquidator instead of or jointly with the person nominated by
the creditors, or appointing the Official Liquidator or some other person to be
liquidator instead of the person appointed by the creditors.
(3) If no person is nominated by the creditors, the person, if
any, nominated by the company shall be liquidator.
(4) If no person is nominated by the company, the person, if any,
nominated by the creditors shall be liquidator.
Appointment of committee of inspection.
503.
(1) The creditors at the meeting to be held in pursuance of
section 500 or at any subsequent meeting may, if they think fit, appoint a
committee of inspection consisting of not more than five persons.
(2) If such a committee is appointed, the company may, either at
the meeting at which the resolution for voluntary winding up is passed or at
any subsequent general meeting, appoint such number of persons (not exceeding
five) as they think fit to act as members of the committee:
Provided that the creditors may, if they think fit, resolve that all or any of
the persons so appointed by the company ought not to be members of the
committee of inspection.
(3) If the creditors so resolve, the persons mentioned in the
resolution shall not, unless the [Tribunal]
otherwise directs, be qualified to act as members of the committee.
(4) On any application to the [Tribunal] for a direction
under sub-section (3), the [Tribunal]
may, if it thinks fit, appoint other persons to act as members of the committee
of inspection in the place of the persons mentioned in the creditors’
resolution.
(5) Subject to the provisions of sub-sections (1) to (4) and to
such rules as may be made by the Central Government, the provisions of section
465 (except sub-section (1) thereof) shall apply with respect to a committee of
inspection appointed under this section as they apply with respect to a
committee of inspection appointed in a winding up by the [Tribunal].
Fixing of liquidators’ remuneration.
504.
(1) The committee of inspection, or if there is no such committee,
the creditors, may fix the remuneration to be paid to the liquidator or
liquidators.
(2) Where the remuneration is not so fixed, it shall be determined
by the [Tribunal].
(3) Any remuneration fixed under sub-section (1) or (2) shall not
be increased in any circumstances whatever, whether with or without the
sanction of the [Tribunal].
Board’s powers to cease on appointment of liquidator.
505. On
the appointment of a liquidator, all the powers of the Board of directors shall
cease, except in so far as the committee of inspection, or if there is no such
committee, the creditors in general meeting, may sanction the continuance
thereof.
Power to fill vacancy in office of liquidator.
506. If a
vacancy occurs by death, resignation or otherwise, in the office of a
liquidator (other than a liquidator appointed by, or by the direction of, the [Tribunal]), the creditors in
general meeting may fill the vacancy.
Application of section 494 to a creditors’
voluntary winding up.
507. The
provisions of section 494 shall apply in the case of a creditors’ voluntary
winding up as in the case of a members’ voluntary winding up, with the
modification that the powers of the liquidator under that section shall not be
exercised except with the sanction either of the [Tribunal] or of the committee
of inspection.
Duty of liquidator to call meetings of company and of
creditors at end of each year.
508.
(1) In the event of the winding up continuing for more than one
year, the liquidator shall—
(a) call
a general meeting of the company and a meeting of the creditors at the end of
the first year from the commencement of the winding up and at the end of each
succeeding year, or as soon thereafter as may be convenient within three months
from the end of the year or such longer period as the Central Government may
allow; and
(b) lay before the meetings an account of his acts and dealings
and of the conduct of the winding up during the preceding year, together with
a statement in the prescribed form and containing the prescribed particulars
with respect to the proceedings in, and position of, the winding up.
(2) If the liquidator fails to comply with sub-section (1), he
shall be punishable, in respect of each failure, with fine which may extend to
[one thousand] rupees
Final meeting and dissolution.
509.
(1) As soon as the affairs of the company are fully wound up, the
liquidator shall—
(a) make
up an account of the winding up, showing how the winding up has been conducted
and the property of the company has been disposed of; and
(b) call a general meeting of the company and a meeting of the
creditors for the purpose of laying the account before the meetings and giving
any explanation thereof.
(2) Each such meeting shall be called by advertisement—
(a) specifying the
time, place and object thereof; and
(b) published not less than one month before the meeting in the
Official Gazette and also in some newspaper circulating in the district where
the registered office of the company is situate.
(3) Within one week after the date of the meetings, or if the
meetings are not held on the same date, after the date of the later meeting,
the liquidator shall send to the [Registrar and the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
a copy each of the account and shall make a return to each of them] of the
holding of the meetings and of the date or dates on which they were held.
If the copy is not so sent or the return is not
so made, the liquidator shall be punishable with fine which may extend to [five
hundred] rupees for every day during which the default continues.
(4) If a quorum (which for the purposes of this section shall be
two persons) is not present at either of such meetings, the liquidator shall,
in lieu of the return referred to in sub-section (3), make a return that the
meeting was duly called and that no quorum was present thereat.
Upon such a return being made within one week
after the date fixed for the meeting, the provisions of sub-section (3) as to
the making of the return shall, in respect of that meeting, be deemed to have
been complied with.
[(5) The Registrar, on receiving the account and also, in respect of
each such meeting, either the return mentioned in sub-section (3) or the return
mentioned in sub-section (4), shall forthwith register them.
(6) The Official Liquidator [referred to in clause (c)
of sub-section (1) of section 448], on receiving the account and
either the return mentioned in sub-section (3) or the return mentioned in
sub-section (4), shall, as soon as may be, make, and the liquidator and all
officers, past or present, of the company shall give the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
all reasonable facilities to make, a scrutiny of the books and papers of the
company and if on such scrutiny the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
makes a report to the [Tribunal]
that the affairs of the company have not been conducted in a manner
prejudicial to the interests of its members or to public interest, then, from
the date of the submission of the report to the [Tribunal] the company shall be deemed to be dissolved.
(6A) If on such scrutiny the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
makes a report to the [Tribunal]
that the affairs of the company have been conducted in a manner prejudicial
as aforesaid, the [Tribunal]
shall by order direct the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
to make a further investigation of the affairs of the company and for that
purpose shall invest him with all such powers as the [Tribunal] deem fit.
(6B) On the receipt of the report of the Official Liquidator [referred to in clause (c) of sub-section (1) of section 448]
on such further investigation the [Tribunal] may either make an order that the company shall
stand dissolved with effect from the date to be specified by the [Tribunal] therein or make such
other order as the circumstances of the case brought out in the report permit.]
(7) If the liquidator fails to call a general meeting of the
company or a meeting of the creditors as required by this section, he shall be
punishable, in respect of each such failure, with fine which may extend to
[five thousand] rupees.
Provisions applicable to every voluntary winding up.
510. The provisions
contained in sections 511 to 521, both inclusive, shall apply to every voluntary winding up,
whether a members’
or a creditors’ winding up.
Distribution of property of company.
511. Subject
to the provisions of this Act as to preferential payments, the assets of a
company shall, on its winding up, be applied in satisfaction of its liabilities
pari passu and,
subject to such application, shall, unless the articles otherwise provide, be
distributed among the members according to their rights and interests in the
company.
Application of section 454 to voluntary winding up.
511A. The
provisions of section 454 shall, so far as may be, apply to every voluntary
winding up as they apply to the winding up by the [Tribunal] except that
references to—
(a) the [Tribunal] shall be omitted;
(b) the Official Liquidator or the provisional liquidator shall be
construed as references to the liquidator; and
(c) the “relevant date” shall be construed as references to the
date of commencement of the winding up.]
Powers and duties of liquidator in voluntary winding up.
512.
(1) The liquidator may,—
(a) in
the case of a members’ voluntary winding up, with the sanction of a special
resolution of the company, and in the case of a creditors’ voluntary winding
up, with the sanction of the [Tribunal]
or, the committee of inspection or, if there is no such committee, of a
meeting of the creditors, exercise any of the powers given by [clauses (a) to (d) of sub-section (1)] of section 457 to a liquidator in a
winding up by the [Tribunal];
(b) without the sanction referred to in clause (a), exercise any of the other powers
given by this Act to the liquidator in a winding up by the [Tribunal];
(c) exercise the power of the [Tribunal] under this Act of settling a list of
contributories (which shall be prima
facie evidence of the liability of the persons named therein to be
contributories);
(d) exercise the
power of the [Tribunal]
of making calls;
(e) call general meetings of the company for the purpose of
obtaining the sanction of the company by ordinary or special resolution, as the
case may require, or for any other purpose he may think fit.
(2) The exercise by the liquidator of the powers given by clause
(a) of sub-section (1) shall be
subject to the control of the [Tribunal];
and any creditor or contributory may apply to the [Tribunal] with respect to any
exercise or proposed exercise of any of the powers conferred by this section.
(3) The liquidator shall pay the debts of the company and shall
adjust the rights of the contributories among themselves.
(4) When several liquidators are appointed, any power given by
this Act may be exercised by such one or more of them as may be determined at
the time of their appointment, or, in default of such determination, by any
number of them not being less than two.
Body corporate not to be appointed
as liquidator.
513.
(1) A body corporate shall not be qualified
for appointment as liquidator of a company in a voluntary winding up.
(2) Any appointment made in contravention of
sub-section (1) shall be void.
(3) Any body corporate which acts as liquidator
of a company, and every director [***] or a manager thereof, shall be
punishable with fine which may extend to [ten] thousand rupees
:
[Provided that, notwithstanding anything contained in
any other law for the time being in force, a body corporate consisting of such
professionals as may be approved by the Central Government from time to time,
shall be qualified for appointment as Official Liquidator under section 448.]
Corrupt inducement affecting appointment as liquidator.
514. Any
person who gives, or agrees or offers to give, to any member or creditor of a
company any gratification whatever with a view to—
(a) securing
his own appointment or nomination as the company’s liquidator; or
(b) securing or
preventing the appointment or nomination of some person other than himself, as
the company’s liquidator;
shall be punishable with fine which may extend to
[ten] thousand rupees.
Power of Tribunal to appoint and remove liquidator in
voluntary winding up.
515. (1) If
from any cause whatever, there is no liquidator acting, the Tribunal may
appoint the Official Liquidator or any other person as a liquidator.
(2) The Tribunal may, on cause shown, remove
a liquidator and appoint the Official Liquidator or any other person as a
liquidator in place of the removed liquidator.
(3) The Tribunal may also appoint or remove a
liquidator on the application made by the Registrar in this behalf.
(4) If the Official Liquidator is appointed
as liquidator under the proviso to sub-section (2) of section 502 or under this
section, the remuneration to be paid to him shall be fixed by the Tribunal and
shall be credited to the Central Government.]
Notice
by liquidator of his appointment.
516. (1) The
liquidator shall, within [thirty] days after his appointment publish in the
Official Gazette, and deliver to the Registrar for registration, a notice of
his appointment in the form prescribed.
(2) If the liquidator fails to comply with sub-section (1), he
shall be punishable with fine which may extend to [five hundred] rupees for
every day during which the default continues.
Arrangement when binding on company and creditors.
517. (1) Any
arrangement entered into between a company about to be, or in the course of
being, wound up and its creditors shall, subject to the right of appeal under
this section, be binding on the company and on the creditors if it is
sanctioned by a special resolution of the company and acceded to by
three-fourths in number and value of the creditors.
(2) Any creditor or contributory may, within three weeks from the
completion of the arrangement, appeal to the [Tribunal] against it and the [Tribunal] may thereupon, as it
thinks just, amend, vary, confirm or set aside the arrangement.
Power to apply to Tribunal to
have questions determined or powers exercised.
518. (1) The
liquidator or any contributory or creditor may apply to the Tribunal,—
(a) to determine any
question arising in the winding up of a company; or
(b) to exercise, as respects the enforcing of
calls, the staying of proceedings or any other matter, all or any of the powers
which the Tribunal might exercise if the company were being wound up by the
Tribunal.
(2) The liquidator or any creditor or
contributory may apply to the Tribunal for an order setting aside any
attachment, distress or execution put into force against the estate or effects
of the company after the commencement of the winding up.
(3) The Tribunal, if satisfied on an
application under sub-section (1) or sub-section (2) that the determination of
the question or the required exercise of power or the order applied for will be
just and beneficial, may accede wholly or partially to the application on such
terms and conditions as it thinks fit, or may make such other order on the
applications as it thinks just.
(4) A copy of an order staying the
proceedings in the winding up, made by virtue of this section, shall forthwith
be forwarded by the company, or otherwise as may be prescribed, to the
Registrar, who shall make a minute of the order in his books relating to the
company.
Application of liquidator to Tribunal for public
examination of promoters, directors, etc.
519.(1) The liquidator may make a report to the
Tribunal stating that in his opinion a fraud has been committed by any person
in the promotion or formation of the company or by any officer of the company
in relation to the company since its formation; and the Tribunal may, after
considering the report, direct that that person or officer shall attend before
the Tribunal on a day appointed by it for that purpose, and be publicly
examined as to the promotion or formation or the conduct of the business of the
company, or as to his conduct and dealings as officer thereof.
(2) The provisions of sub-sections (2) to
(11) of section 478 shall apply in relation to any examination directed under
sub-section (1) as they apply in relation to an examination directed under
sub-section (1) of section 478 with references to the liquidator being
substituted for references to the Official Liquidator in those provisions.]
Costs of voluntary winding up.
520. All
costs, charges and expenses properly incurred in the winding up, including the
remuneration of the liquidator, shall, subject to the rights of secured
creditors, if any, be payable out of the assets of the company in priority to
all other claims.
Saving of right of creditors and contributories to apply
for winding up.
521. [Omitted by the Companies (Amendment) Act,
1960. For the original section, refer Appendix
I].
Winding up
subject to supervision of Court
Power to
order winding up subject to supervision.
522. [Omitted by the Companies (Second Amendment) Act, 2002, w.e.f. a date yet to be notified.]
Effect of petition for
winding up subject to supervision.
523.
Omitted
by the Companies (Second Amendment) Act, 2002, w.e.f.
a date yet to be notified.]
Power of Court to appoint or
remove liquidators.
524. [Omitted by the Companies (Second Amendment) Act, 2002, w.e.f. a date yet to be notified.]
Powers and obligations of
liquidator appointed by Court.
525. [Omitted by the Companies (Second Amendment) Act, 2002, w.e.f. a date yet to be notified.]
526. [Omitted by the Companies (Second Amendment) Act, 2002, w.e.f. a date yet to be notified.]
Appointment in certain cases
of voluntary liquidators to office of liquidators.
527. [Omitted by the Companies (Second Amendment) Act, 2002, w.e.f. a date yet to be notified.]
Provisions
applicable to every mode of winding up
Debts of
all descriptions to be admitted to proof.
528. In
every winding up (subject, in the case of insolvent companies, to the
application in accordance with the provisions of this Act of the law of
insolvency), all debts payable on a contingency, and all claims against the
company, present or future, certain or contingent, ascertained or sounding
only in damages, shall be admissible to proof against the company, a just
estimate being made, so far as possible, of the value of such debts or claims
as may be subject to any contingency, or may sound only in damages, or for some
other reason may not bear a certain value.
Application of insolvency rules
in winding up of insolvent companies.
529.(1) In the winding up of an
insolvent company, the same rules shall prevail and be observed with regard to—
(a) debts
provable;
(b) the
valuation of annuities and future and contingent liabilities; and
(c) the
respective rights of secured and unsecured creditors;
as are in force for the time being under the law
of insolvency with respect to the estates of persons adjudged insolvent :
Provided that the security of every secured creditor shall be deemed to be
subject to a pari passu charge in favour of
the workmen to the extent of the workmen’s portion therein, and, where a
secured creditor, instead of relinquishing his security and proving his debt,
opts to realise his security,—
(a) the liquidator shall be entitled to represent the workmen
and enforce such charge;
(b) any amount realised by the
liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen’s dues; and
(c) so much of the debt due to such secured creditor as could
not be realised by him by virtue of the foregoing
provisions of this proviso or the amount of the workmen’s portion in his
security, whichever is less, shall rank pari passu
with the workmen’s dues for the purposes of section 529A.]
(2) All persons who in any such case would be entitled to prove
for and receive dividends out of the assets of the company, may come in under
the winding up, and make such claims against the company as they respectively
are entitled to make by virtue of this section :
[Provided that if a
secured creditor instead of relinquishing his security and proving for his debt
proceeds to realise his security, he shall be liable
to pay [his portion of] the expenses incurred by the liquidator (including a
provisional liquidator, if any) for the preservation of the security before
its realization by the secured creditor.]
[Explanation : For the purposes of this proviso, the
portion of expenses incurred by the liquidator for the preservation of a
security which the secured creditor shall be liable to pay shall be the whole
of the expenses less an amount which bears to such expenses the same proportion
as the workmen’s portion in relation to the security bears to the value of the
security.]
[(3) For
the purposes of this section, section 529A and section 530,—
(a) “workmen”, in relation to a company, means the employees of
the company, being workmen within the meaning of the Industrial Disputes Act,
1947 (14 of 1947);
(b) “workmen’s dues”, in relation to a company, means the aggregate
of the following sums due from the company to its workmen, namely :—
(i) all wages or salary including wages
payable for time or piece work and salary earned wholly or in part by way of
commission of any workman, in respect of services rendered to the company and
any compensation payable to any workman under any of the provisions of the
Industrial Disputes Act, 1947 (14 of 1947);
(ii) all accrued holiday remuneration becoming payable to any
workman, or in the case of his death to any other person in his right, on the
termination of his employment before, or by the effect of, the winding up order
or resolution;
(iii) unless
the company is being wound up voluntarily merely for the purposes of
reconstruction or of amalgamation with another company, or unless the company
has, at the commencement of the winding up, under such a contract with insurers
as is mentioned in section 14 of the Workmen’s Compensation Act, 1923 (8 of
1923), rights capable of being transferred to and vested in the workman, all amounts
due in respect of any compensation or liability for compensation under the said
Act in respect of the death or disablement of any workman of the company;
(iv) all
sums due to any workman from a provident fund, a pension fund, a gratuity fund
or any other fund for the welfare of the workmen, maintained by the company;
(c) “workmen’s
portion”, in relation to the security of any secured creditor of a company,
means the amount which bears to the value of the security the same proportion
as the amount of the workmen’s dues bears to the aggregate of—
(i) the amount of workmen’s dues; and
(ii) the amounts of the debts due to the secured creditors.
Illustration
The value of the security of a secured
creditor of a company is Rs. 1,00,000.
The total amount of the workmen’s dues is Rs. 1,00,000. The amount of the debts due from the company to its
secured creditors is Rs. 3,00,000.
The aggregate of the amount of workmen’s dues and of the amounts of debts due
to secured creditors is Rs. 4,00,000.
The workmen’s portion of the security is, therefore, one-fourth of the value of
the security, that is Rs.
25,000.]
Overriding preferential payments.
529A. (1)
Notwithstanding anything contained in any other provision of this Act or any
other law for the time being in force, in the winding up of a company—
(a) workmen’s
dues; and
(b) debts due to secured creditors to the extent such debts rank
under clause (c) of the proviso
to sub-section (1) of section 529 pari passu with such dues,
shall be paid in priority to all other debts.
(2) The debts payable under clause (a) and clause (b)
of sub-section (1) shall be paid in full, unless the assets are insufficient
to meet them, in which case they shall abate in equal proportions.]
530. (1) In
a winding up, [subject to the provisions of section 529A,] there shall be paid
in priority to all other debts—
(a) all
revenues, taxes, cesses and rates due from the
company to the Central or a State Government or to a local authority at the
relevant date as defined in clause (c)
of sub-section (8), and having become due and payable within the twelve months
next before that date;
(b) all
wages or salary (including wages payable for time or piece work and salary
earned wholly or in part by way of commission) of any employee, in respect of
services rendered to the company and due for a period not exceeding four months
within the twelve months next before the relevant date [* * *], subject to the
limit specified in sub-section (2);
(c) all accrued holiday remuneration becoming payable to any
employee, or in the case of his death to any other person in his right, on the
termination of his employment before, or by the effect of, the winding up order
or resolution;
(d) unless
the company is being wound up voluntarily merely for the purposes of
reconstruction or of amalgamation with another company, all amounts due, in
respect of contributions payable during the twelve months next before the
relevant date, by the company as the employer of any persons, under the
Employees’ State Insurance Act, 1948 (34 of 1948), or any other law for the
time being in force;
(e) unless
the company is being wound up voluntarily merely for the purposes of
reconstruction or of amalgamation with another company, or unless the company
has, at the commencement of the winding up, under such a contract with insurers
as is mentioned in section 14 of the Workmen’s Compensation Act, 1923 (8 of
1923), rights capable of being transferred to and vested in the workman, all
amounts due in respect of any compensation or liability for compensation under
the said Act in respect of the death or disablement of any employee of the
company;
(f) all
sums due to any employee from a provident fund, a pension fund, a gratuity fund
or any other fund for the welfare of the employees, maintained by the company;
and
(g) the expenses of any investigation held in pursuance of
section 235 or 237, in so far as they are payable by the company.
(2) The sum to which priority is to be given under clause (b) of sub-section (1), shall not, in
the case of any one claimant, [exceed such sum as may be notified by the
Central Government in the Official Gazette].
[* * *]
(3) Where any compensation under the Workmen’s Compensation Act,
1923 (8 of 1923) is a weekly payment, the amount due in respect thereof shall,
for the purposes of clause (e)
of sub-section (1), be taken to be the amount of the lump sum for which the
weekly payment could, if redeemable, be redeemed if the employer made an
application for that purpose under the said Act.
(4) Where any payment has been made to any employee of a company,—
(i) on account of wages or salary; or
(ii) to him, or in the case of his death, to any other person in
his right, on account of accrued holiday remuneration,
out of money advanced by some person for that
purpose, the person by whom the money was advanced shall, in a winding up, have
a right of priority in respect of the money so advanced and paid, up to the
amount by which the
sum in respect of which the employee or other person in his
right, would have been entitled to priority in the winding up has been
diminished by reason of the payment having been made.
(5) The foregoing debts shall—
(a) rank equally among themselves and be paid in full, unless the
assets are insufficient to meet them, in which case they shall abate in equal
proportions; and
(b) so
far as the assets of the company available for payment of general creditors are
insufficient to meet them, have priority over the claims of holders of
debentures under any floating charge created by the company, and be paid
accordingly out of any property comprised in or subject to that charge.
(6) Subject to the retention of such sums as may be necessary for
the costs and expenses of the winding up, the foregoing debts shall be
discharged forthwith so far as the assets are sufficient to meet them, and in
the case of the debts to which priority is given by clause (d) of sub-section (1), formal proof
thereof shall not be required except in so far as may be otherwise prescribed.
(7) In the event of a landlord or other person distraining
or having distrained on any goods or effects of the
company within three months next before the date of a winding up order, the
debts to which priority is given by this section shall be a first charge on the
goods or effects so distrained on, or the proceeds of
the sale thereof :
Provided that, in respect of any money paid under any such charge, the landlord
or other person shall have the same rights of priority as the person to whom
the payment is made.
(8) For the purposes of this section—
(a) any remuneration in respect of a period of holiday or of
absence from work through sickness or other good cause shall be deemed to be
wages in respect of services rendered to the company during that period;
(b) the
expression “accrued holiday remuneration” includes, in relation to any person,
all sums which, by virtue either of his contract of employment or of any
enactment (including any order made or direction given under any enactment),
are payable on account of the remuneration which would, in the ordinary course,
have become payable to him in respect of a period of holiday, had his
employment with the company continued until he became entitled to be allowed
the holiday; [* * *]
(bb) the expression “employee” does not
include a workman; and]
(c) the
expression “the relevant date” means—
(i) in the case of a company ordered to
be wound up compulsorily, the date of the appointment (or first appointment)
of a provisional liquidator, or if no such appointment was made, the date of
the winding up order, unless in either case the company had commenced to be
wound up voluntarily before that date; and
(ii) in any case where sub-clause (i) does not apply, the date of
the passing of the resolution for the voluntary winding up of the company.
(9) This section shall not apply in the case of a winding up where
the date referred to in sub-section (5) of section 230 of the Indian Companies
Act, 1913 (7 of 1913),
occurred before the commencement of this Act, and in such a case,
the provisions relating to preferential payments which would have applied if
this Act had not been passed, shall be deemed to remain in full force.
Effect of winding up on antecedent and other
transactions
Fraudulent preference.
531. (1) Any transfer of property, movable or
immovable, delivery of goods, payment, execution or other act relating to
property made, taken or done by or against a company within six months before
the commencement of its winding up which, had it been made, taken or done by or
against an individual within three months before the presentation of an
insolvency petition on which he is adjudged insolvent, would be deemed in his
insolvency a fraudulent preference, shall in the event of the company being
wound up, be deemed a fraudulent preference of its creditors and be invalid
accordingly :
Provided that, in relation to things made, taken or done before the commencement
of this Act, this sub-section shall have effect with the substitution, for the
reference to six months, of a reference to three months.
(2) For the purposes of sub-section (1), the presentation of a
petition for winding up in the case of a winding up by [the Tribunal], and the passing
of a resolution for winding up in the case of a voluntary winding up, shall be
deemed to correspond to the act of insolvency in the case of an individual.
Avoidance of voluntary transfer.
531A. Any
transfer of property, movable or immovable, or any delivery of goods, made by a
company, not being a transfer or delivery made in the ordinary course of its
business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration,
if made within a period of one year before the presentation of a petition for
winding up by [the Tribunal]
or the passing of a resolution for voluntary winding up of the company, shall
be void against the liquidator.]
Transfers for benefit of all creditors to be void.
532. Any
transfer or assignment by a company of all its property to trustees for the benefit
of all its creditors shall be void.
Liabilities and rights of
certain fraudulently preferred persons.
533. (1) Where, in the case of a company which is
being wound up, anything made, taken or done after the commencement of this Act
is invalid under section 531 as a fraudulent preference of a person interested
in property mortgaged or charged to secure the company’s debt, then (without
prejudice to any rights or liabilities arising apart from this provision), the
person preferred shall be subject to the same liabilities, and shall have the
same rights, as if he had undertaken to be personally liable as surety for the
debt, to the extent of the mortgage or charge on the property or the value of
his interest, whichever is less.
(2) The value of the said person’s interest shall be determined
as at the date of the transaction constituting the fraudulent preference, and
shall be determined as if the interest were free of all encumbrances other than
those to which the mortgage or charge for the company’s debt was then subject.
(3) On any application made to the [Tribunal] with
respect to any payment on the ground that the payment was a fraudulent preference
of a surety or guarantor, the [Tribunal]
shall have jurisdiction to determine any questions with respect to the
payment arising between the person to whom the payment was made and the surety
or guarantor and to grant relief in respect thereof, notwithstanding that it is
not necessary so to do for the purposes of the winding up, and for that purpose
may give leave to bring in the surety or guarantor as a third party as in the
case of a suit for the recovery of the sum paid.
This sub-section shall apply, with the
necessary modifications, in relation to transactions other than the payment of
money as it applies in relation to payments of money.
534. Where
a company is being wound up, a floating charge on the undertaking or property
of the company created within the twelve months immediately preceding the commencement
of the winding up, shall, unless it is proved that the company immediately
after the creation of the charge was solvent, be invalid, except to the amount
of any cash paid to the company at the time of, or subsequently to the
creation of, and in consideration for, the charge, together with interest on
that amount at the rate of five per cent per annum or such other rate as may
for the time being be notified by the Central Government in this behalf in the
Official Gazette :
Provided that in relation to a charge created more than three months before the
commencement of this Act, this section shall have effect with the substitution,
for references to twelve months of references to three months.
Disclaimer of onerous property in case of a company which
is being wound up.
535. (1) Where any part of the property of a company which is being
wound up consists of—
(a) land
of any tenure, burdened with onerous covenants;
(b) shares or
stock in companies;
(c) any other property which is unsaleable
or is not readily saleable, by reason of its binding the possessor thereof
either to the performance of any onerous act or to the payment of any sum of
money; or
(d) unprofitable
contracts;
the liquidator of the company, notwithstanding
that he has endeavoured to sell or has taken
possession of the property, or exercised any act of ownership in relation
thereto, or done anything in pursuance of the contract, may, with the leave of
the [Tribunal] and
subject to the provisions of this section, by writing signed by him, at any
time within twelve months after the commencement of the winding up or such
extended period as may be allowed by the [Tribunal], disclaim the property :
Provided that, where any such property has not come to the knowledge of the liquidator
within one month after the commencement of the winding up, the power of
disclaiming the property may be exercised at any time within twelve months
after he has become aware thereof or such extended period as may be allowed by
the [Tribunal].
(2) The disclaimer shall operate to determine, as from the date of
disclaimer, the rights, interest, and liabilities of the company, and the
property of the company, in or in respect of the property disclaimed, but shall
not, except so far as is necessary for the purpose of releasing the company and
the property of the company from liability, affect the rights or liabilities of
any other person.
(3) The [Tribunal],
before or on granting leave to disclaim, may require such notices to be given
to persons interested, and impose such terms as a condition of granting leave,
and make such other order in the matter as the [Tribunal] thinks just.
(4) The liquidator shall not be entitled to disclaim any property
in any case where an application in writing has been made to him by any person
interested in the property requiring him to decide whether he will or will not
disclaim, and the liquidator has not, within a period of twenty-eight days
after the receipt of the application or such extended period as may be allowed
by the [Tribunal],
given notice to the applicant that he intends to apply to the [Tribunal] for leave to
disclaim; and in case the property is a contract, if the liquidator, after such
an application as aforesaid, does not within the said period or extended
period disclaim the contract, [he shall be deemed to have adopted it].
(5) The [Tribunal]
may, on the application of any person who is, as against the liquidator,
entitled to the benefit or subject to the burden of a contract made with the
company, make an order rescinding the contract on such terms as to payment by
or to either party of damages for the non-performance of the contract, or
otherwise as the [Tribunal]
thinks just; and any damages payable under the order to any such person may be
proved by him as a debt in the winding up.
(6) The [Tribunal]
may, on an application by any person who either claims any interest in any
disclaimed property or is under any liability not discharged by this Act in respect
of any disclaimed property, and after hearing any such persons as it thinks
fit, make an order for the vesting of the property in, or the delivery of the
property to, any person entitled thereto or to whom it may seem just that the
property should be delivered by way of compensation for such liability as
aforesaid, or a trustee for him, and on such terms as the [Tribunal] thinks just; and on
any such vesting order being made, the property comprised therein shall vest
accordingly in the person therein named in that behalf without any conveyance
or assignment for the purpose :
Provided that, where the property disclaimed is of a leasehold nature, the [Tribunal] shall not make a
vesting order in favour of any person claiming under
the company, whether as under-lessee or as mortgagee or holder of a charge by
way of demise, except upon the terms of making that person—
(a) subject to the same liabilities and obligations as those to
which the company was subject under the lease in respect of the property at the
commencement of the winding up; or
(b) if the [Tribunal]
thinks fit, subject only to the same liabilities and obligations as if the
lease had been assigned to that person at that date;
and in either event (if the case so requires)
as if the lease had comprised only the property comprised in the vesting order;
and any mortgagee or under-lessee declining to accept a vesting order upon such
terms shall be excluded from all interest in and security upon the property,
and, if there is no person claiming under the company who is willing to accept
an order upon such terms, the [Tribunal]
shall have power to vest the estate and interest of the company in the
property in any person liable, either personally or in a representative
character, and either alone or jointly with the company, to perform the
lessee’s covenants in the lease, freed and discharged from all estates,
encumbrances and interests created therein by the company.
(7) Any person injured by the operation of a disclaimer under this
section shall be deemed to be a creditor of the company to the amount of the
compensation or damages payable in respect of the injury, and may accordingly
prove the amount as a debt in the winding up.
Avoidance of transfers, etc., after commencement of
winding up.
536. (1) In
the case of a voluntary winding up, any transfer of shares in the company, not
being a transfer made to or with the sanction of the liquidator, and any
alteration in the status of the members of the company, made after the
commencement of the winding up, shall be void.
(2) In the case of a winding up by [the Tribunal] , any disposition of the property
(including actionable claims) of the company, and any transfer of shares in
the company or alteration in the status of its members, made after the commencement
of the winding up, shall, unless the [Tribunal] otherwise orders, be void.
Avoidance of certain
attachments, executions, etc., in winding up by Tribunal.
537. (1) Where any company is being wound up by
the Tribunal—
(a) any attachment, distress
or execution put in force, without leave of the Tribunal against the estate or
effects of the company, after the commencement of the winding up; or
(b) any sale held,
without leave of the Tribunal of any of the properties or effects of the
company after such commencement,
shall be void.
(2) Nothing in this section
applies to any proceedings for the recovery of any tax or impost or any dues
payable to the Government.]
Offences antecedent to or in course of winding
up
Offences by
officers of companies in liquidation.
538. (1) If
any person, being a past or present officer of a company which, at the time of
the commission of the alleged offence, is being wound up, whether by [the Tribunal] or voluntarily, or which is subsequently ordered
to be wound up by the [Tribunal]
or which subsequently passes a resolution for voluntary winding up,—
(a) does
not, to the best of his knowledge and belief, fully and truly discover to the
liquidator all the property, movable and immovable, of the company, and how and
to whom and for what consideration and when the company disposed of any part
thereof, except such part as has been disposed of in the ordinary course of the
business of the company;
(b) does
not deliver up to the liquidator, or as he directs, all such part of the
movable and immovable property of the company as is in his custody or under his
control, and which he is required by law to deliver up;
(c) does
not deliver up to the liquidator, or as he directs, all such books and papers
of the company as are in his custody or under his control and which he is
required by law to deliver up;
(d) within
the twelve months next before the commencement of the winding up or at any time
thereafter, conceals any part of the property of the company to the value of
one hundred rupees or upwards, or conceals any debt due to or from the company;
(e) within
the twelve months next before the commencement of the winding up or at any time
thereafter, fraudulently removes any part of the property of the company to the
value of one hundred rupees or upwards;
(f) makes any material omission in any
statement relating to the affairs of the company;
(g) knowing or believing that a false debt has been proved by
any person under the winding up, fails for a period of one month to inform the
liquidator thereof;
(h) after the commencement of the winding up, prevents the
production of any book or paper affecting or relating to the property or
affairs of the company;
(i) within the twelve months next before the
commencement of the winding up or at any time thereafter, conceals, destroys,
mutilates or falsifies, or is privy to the concealment, destruction,
mutilation or falsification of, any book or paper affecting or relating to, the
property or affairs of the company;
(j) within
the twelve months next before the commencement of the winding up or at any time
thereafter makes, or is privy to the making of, any false entry in any book or
paper affecting or relating to, the property or affairs of the company;
(k) within
the twelve months next before the commencement of the winding up or at any time
thereafter, fraudulently parts with, alters or makes any omission in, or is
privy to the fraudulent parting with, altering or making of any omission in,
any book or paper affecting or relating to the property or affairs of the
company;
(l) after
the commencement of the winding up or at any meeting of the creditors of the
company within the twelve months next before the commencement of the winding up,
attempts to account for any part of the property of the company by fictitious
losses or expenses;
(m) within the twelve months next before the commencement of the
winding up or at any time thereafter, by any false representation or other
fraud, obtains on credit, for or on behalf of the company, any property which
the company does not subsequently pay for;
(n) within
the twelve months next before the commencement of the winding up or at any time
thereafter, under the false pretence that the company is carrying on its
business, obtains on credit, for or on behalf of the company, any property
which the company does not subsequently pay for;
(o) within
the twelve months next before the commencement of the winding up or at any time
thereafter, pawns, pledges or disposes of any property of the company which has
been obtained on credit and has not been paid for, unless such pawning, pledging
or disposing is in the ordinary course of the business of the company; or
(p) is guilty of any false representation or other
fraud for the purpose of obtaining the consent of the creditors of the company
or any of them, to an agreement with reference to the affairs of the company or
to the winding up;
he shall be punishable, in the case of any of
the offences mentioned in clauses (m),
(n) and (o), with imprisonment for a term
which may extend to five years, or with fine, or with both, and, in the case of
any other offence, with imprisonment for a term which may extend to two years,
or with fine, or with both:
Provided that it shall be a good defence—
(i) to a charge under any of the clauses (b), (c), (d), (f), (n) and (o), if
the accused proves that he had no intent to defraud; and
(ii) to a charge under any of the clauses (a), (h), (i)
and (j), if he proves that he had
no intent to conceal the true state of affairs of the company or to defeat the
law.
(2) Where any person pawns, pledges or disposes of any property
in circumstances which amount to an offence under clause (o) of sub-section (1), every person
who takes in pawn or pledge or otherwise receives the property, knowing it to
be pawned, pledged, or disposed of in such circumstances as aforesaid, shall be
punishable with imprisonment for a term which may extend to three years, or
with fine, or with both.
(3) For the purposes of this section, the expression “officer”
shall include any person in accordance with whose directions or instructions
the directors of the company have been accustomed to act.
Penalty for falsification of books.
539. If
with intent to defraud or deceive any person, any officer or contributory of a
company which is being wound up—
(a) destroys, mutilates, alters, falsifies or secrets, or is
privy to the destruction, mutilation, alteration, falsification or secreting
of, any books, papers or securities; or
(b) makes, or is privy to the making of, any false or fraudulent
entry in any register, book of account or document belonging to the company;
he shall be punishable with imprisonment for a
term which may extend to seven years, and shall also be liable to fine.
Penalty for frauds by officers.
540. If
any person, being at the time of the commission of the alleged offence an
officer of a company which is subsequently ordered to be wound up by the [Tribunal] or which subsequently
passes a resolution for voluntary winding up,—
(a) has, by false pretences or by means of any other fraud,
induced any person to give credit to the company; or
(b) with
intent to defraud creditors of the company, has made or caused to be made any
gift or transfer of or charge on, or has caused or connived at the levying of
any execution against, the property of the company; or
(c) with
intent to defraud creditors of the company, has concealed or removed any part
of the property of the company since the date of any unsatisfied judgment or
order for payment of money obtained against the company, or within two months
before that date;
he shall be punishable with imprisonment for a
term which may extend to two years and shall also be liable to fine.
Liability where proper accounts not kept.
541. (1)
Where a company is being wound up, if it is shown that proper books of account
were not kept by the company throughout the period of two years immediately
preceding the commencement of the winding up, or the period between the
incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of
the company who is in default shall, unless he shows that he acted honestly and
that in the circumstances in which the business of the company was carried on,
the default was excusable, be punishable with imprisonment for a term which may
extend to one year.
(2) For the purposes of sub-section (1), it shall be deemed that
proper books of account have not been kept in the case of any company, if there
have not been kept—
(a) such
books or accounts as are necessary to exhibit and explain the transactions and
financial position of the business of the company, including books containing
entries made from day to day in sufficient detail of all cash received and all
cash paid; and
(b) where
the business of the company has involved dealings in goods, statements of the
annual stock takings and (except in the case of goods sold by way of ordinary
retail trade) of all goods sold and purchased, showing the goods and the buyers
and the sellers thereof in sufficient detail to enable those goods and those
buyers and sellers to be identified.
Liability for fraudulent conduct of business.
542. (1)
If in the course of the winding up of a company, it appears that any business
of the company has been carried on, with intent to defraud creditors of the
company or any other persons, or for any fraudulent purpose, the [Tribunal], on the application
of the Official Liquidator, or the liquidator or any creditor or contributory of the company,
may, if it thinks it proper so to do, declare that any persons who were
knowingly parties to the carrying on of the business in the manner aforesaid
shall be personally responsible, without any limitation of liability, for all
or any of the debts or other liabilities of the company as the [Tribunal] may direct.
On the hearing of an application under this
sub-section, the Official Liquidator or the liquidator, as the case may be, may
himself give evidence or call witnesses.
(2) (a) Where the [Tribunal] makes any such
declaration, it may give such further directions as it thinks proper for the
purpose of giving effect to that declaration.
(b) In particular,
the [Tribunal]
may make provision for making the liability of any such person under the
declaration a charge on any debt or obligation due from the company to him, or
on any mortgage or charge or any interest in any mortgage or charge on any
assets of the company held by or vested in him, or any person on his behalf, or
any person claiming as assignee from or through the person liable or any person
acting on his behalf.
(c) The [Tribunal] may, from time to
time, make such further order as may be necessary for the purpose of enforcing any
charge imposed under this sub-section.
(d) For the purpose
of this sub-section, the expression “assignee” includes any person to whom or
in whose favour, by the directions of the person liable,
the debt, obligation, mortgage or charge was created, issued or transferred or
the interest was created, but does not include an assignee for valuable
consideration (not including consideration by way of marriage) given in good
faith and without notice of any of the matters on the ground of which the
declaration is made.
(3) Where any business of a company is carried on with such intent
or for such purpose as is mentioned in sub-section (1), every person who was
knowingly a party to the carrying on of the business in the manner aforesaid,
shall be punishable with imprisonment for a term which may extend to two
years, or with fine which may extend to [fifty] thousand rupees, or with both.
(4) This section shall apply, notwithstanding that the person
concerned may be criminally liable in respect of the matters on the ground of
which the declaration is to be made.
Power of Tribunal to assess
damages against delinquent directors, etc.
543.
(1) If in the course of winding up of a company, it appears that any
person who has taken part in the promotion or formation of the company, or any
past or present director, manager, liquidator or officer of the company—
(a) has misapplied, or
retained, or become liable or accountable for, any money or property of the
company; or
(b) has been guilty of
any misfeasance or breach of trust in relation to the company,
the Tribunal
may, on the application of the Official Liquidator, or the liquidator, or of
any creditor or contributory, made within the time specified in that behalf in
sub-section (2), examine into the conduct of the person, director, manager,
liquidator or officer aforesaid, and compel him to repay or restore the money
or property or any part thereof respectively, with interest at such rate as the
Tribunal thinks just, or to contribute such sum to the assets of the company by
way of compensation in respect of the misapplication, retainer, misfeasance or
breach of trust, as the Tribunal thinks just.
(2) An application under
sub-section (1) shall be made within five years from the date of the order for
winding up, or of the first appointment of the liquidator in the winding up, or
of the misapplication, retainer, misfeasance or breach of trust as the case may
be, whichever is longer.
(3) This section shall
apply notwithstanding that the matter is one for which the person concerned may
be criminally liable.]
Liability under sections 542 and 543 to extend to partners
or directors in firm or company.
544. Where
a declaration under section 542 or an order under section 543 is or may be made
in respect of a firm or body corporate, the [Tribunal] shall also have power to make a declaration
under section 542, or pass an order under section 543, as the case may be, in
respect of any person who was at the relevant time a partner in that firm or a
director of that body corporate.
Prosecution of delinquent officers and members of company.
545. (1) If
it appears to the [Tribunal]
in the course of a winding up by [the Tribunal], that any past or present officer, or any
member, of the company has been guilty of any offence in relation to the
company, the [Tribunal]
may, either on the application of any person interested in the winding up
or of its own motion, direct the liquidator either himself to prosecute the
offender or to refer the matter to the Registrar.
(2) If it appears to the liquidator in the course of a voluntary
winding up that any past or present officer, or any member, of the company has
been guilty of any offence in relation to the company, he shall forthwith
report the matter to the Registrar and shall furnish to him such information
and give to him such access to and facilities for inspecting and taking copies
of any books and papers, being information or books and papers in the
possession or under the control of the liquidator and relating to the matter in
question, as the Registrar may require.
(3) Where any report is made under sub-section (2) to the
Registrar, he may, if he thinks fit, refer the matter to the Central Government
for further inquiry.
The Central Government shall thereupon
investigate the matter and may, if it thinks it expedient, apply to the [Tribunal] for an order
conferring on any person designated by the Central Government for the purpose,
with respect to the company concerned, all such powers of investigating the
affairs of the company as are provided by this Act in the case of a winding up
by the [Tribunal].
(4) If on any report to the Registrar under sub-section (2), it
appears to him that the case is not one in which proceedings ought to be taken
by him, he shall inform the liquidator accordingly, and thereupon, subject to
the previous sanction of the [Tribunal],
the liquidator may himself take proceedings against the offender.
(5) If it appears to the [Tribunal] in the course of a
voluntary winding up that any past or present officer, or any member, of the
company has been guilty as aforesaid, and that no report with respect to the
matter has been made by the liquidator to the Registrar under sub-section (2),
the [Tribunal] may,
on the application of any person interested in the winding up or of its own
motion, direct the liquidator to make such a report, and on a report being made
accordingly, the provisions of this section shall have effect as though the
report had been made in pursuance of the provisions of sub-section (2).
(6) If, where any matter is reported or referred to the Registrar
under this section, he considers that the case is one in which a prosecution
ought to be instituted, he shall report the matter to the Central Government;
and that Government may, after taking such legal advice as it thinks fit,
direct the Registrar to institute proceedings:
Provided that no report shall be made by the Registrar under this sub-section
without first giving the accused person an opportunity of making a statement
in writing to the Registrar and of being heard thereon.
(7) When any proceedings are instituted under this section, it
shall be the duty of the liquidator and of every officer and agent of the
company past and present (other than the defendant in the proceedings) to give
all assistance in connection with the prosecution which he is reasonably able
to give.
For the purposes of this sub-section, the
expression “agent”, in relation to a company, shall be deemed to include any
banker or legal adviser of the company and any person employed by the company
as auditor.
(8) If any person fails or neglects to give assistance in the
manner required by sub-section (7), the [Tribunal] may, on the application of the Registrar,
direct that person to comply with the requirements of that sub-section.
(9) Where any such application is made with respect to a liquidator,
the [Tribunal] may,
unless it appears that the failure or neglect was due to the liquidator not
having in his hands sufficient assets of the company to enable him so to do,
direct that the costs of the application shall be borne by the liquidator
personally.
Liquidator to
exercise certain powers subject to sanction.
546. (1) The liquidator may—
(a) with the sanction of the [Tribunal], when the company is being wound up by [the Tribunal] ; and
(b) with the sanction of a special resolution of the company, in
the case of a voluntary winding up,—
(i) pay any classes of creditors in
full;
(ii) make
any compromise or arrangement with creditors or persons claiming to be
creditors, or having or alleging themselves to have any claim, present or
future, certain or contingent, ascertained or sounding only in damages,
against the company, or whereby the company may be rendered liable; or
(iii) compromise
any call or liability to call, debt, and liability capable of resulting in a
debt, and any claim, present or future, certain or contingent, ascertained or
sounding only in damages, subsisting or alleged to subsist between the company
and a contributory or alleged contributory or other debtor or person
apprehending liability to the company, and all questions in any way relating to
or affecting the assets or liabilities or the winding up of the company, on
such terms as may be agreed, and take any security for the discharge of any
such call, debt, liability or claim, and give a complete discharge in respect
thereof.
(1A) Notwithstanding anything contained in sub-section (1), in the case
of a winding up by the [Tribunal],
the Supreme Court may make rules under section 643 providing that the
liquidator may, under such circumstances, if any, and subject to such conditions,
restrictions and limitations, if any, as may be specified in the rules,
exercise any of the powers referred to in sub-clause (ii) or sub-clause (iii)
of sub-section (1) without the sanction of the [Tribunal].]
(2) In the case of a voluntary winding up, the exercise by the
liquidator of the powers conferred by sub-section (1) shall be subject to the
control of the [Tribunal].
(3) Any creditor or contributory may apply to the [Tribunal] with respect to any
exercise or proposed exercise of any such power.
Notification that a company is in liquidation.
547. (1)
Where a company is being wound up, whether by [the Tribunal] or voluntarily, every invoice, order for
goods or business letter issued by or on behalf of the company or a liquidator
of the company, or a receiver or manager of the property of the company, being
a document on or in which the name of the company appears, shall contain a
statement that the company is being wound up.
(2) If default is made in complying with this section, the
company, and every one of the following persons who wilfully
authorises or permits the default, namely, any
officer of the company, any liquidator of the company and any receiver or manager,
shall be punishable with fine which may extend to [five thousand] rupees.
Books and papers of company to be evidence.
548. Where
a company is being wound up, all books and papers of the company and of the
liquidators shall, as between the contributories of the company, be prima facie evidence of the truth of
all matters purporting to be therein recorded.
Inspection of books and papers by creditors and
contributories.
549. (1) At
any time after the making of an order for the winding up of a company by [the Tribunal], any creditor or
contributory of the company may, if [the Supreme Court], by rules prescribed
so permit and in accordance with and subject to such rules but not further or
otherwise, inspect the books and papers of the company.
(2) Nothing in sub-section (1) shall be taken as excluding or
restricting any rights conferred by any law for the time being in force—
(a) on the
Central or a State Government; or
(b) on any
authority or officer thereof; or
(c) on any person acting under the authority of any such
Government or of any such authority or officer.
Disposal of books and papers of company.
550. (1) When the affairs of a company have been
completely wound up and it is about to be dissolved, its books and papers and
those of the liquidator may be disposed of as follows, that is to say :—
[(a) in the case of winding up by the Tribunal, in
such manner as the Tribunal directs;]
(b) in the case of a members’ voluntary winding up, in such
manner as the company by special resolution directs; and
(c) in the case of a creditors’ voluntary winding up, in such
manner as the committee of inspection or, if there is no such committee, as the
creditors of the company may direct.
(2) After the expiry of five years from the dissolution of the
company, no responsibility shall rest on the company, the liquidator, or any
person to whom the custody of the books and papers has been committed, by
reason of any book or paper not being forthcoming to any person claiming to be
interested therein.
(3) The Central Government may, by rules,—
(a) prevent
for such period (not exceeding five years from the dissolution of the company)
as the Central Government thinks proper, the destruction of the books and
papers of a company which has been wound up and of its liquidator; and
(b) enable any creditor or contributory of the company to make
representations to the Central Government in respect of the matters specified
in clause (a) and to appeal to
the [Tribunal] from
any direction which may be given by the Central Government in the matter.
(4) If any person acts in contravention of any such rules or of any direction of the Central Government thereunder, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to [fifty] thousand rupees, or with both.