Winding-up by Tribunal under the Companies Act, 2013

Section 301 of the Companies Act, 2013 empowers the National Company Law Tribunal (NCLT) to order the arrest of a person who is trying to leave India or abscond to evade payment of dues (calls) or avoid examination during the winding up of a company.

The Tribunal, if satisfied that a contributory or a person having property, accounts or papers of the company in his possession is about to leave 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, the tribunal may cause –

(a)the contributory (Mr. Sharma in the given case) to be detained 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 think fit.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(b) (Syllabus 2022).

Section 291 of the Companies Act, 2013 deals with Professional Assistance to Company Liquidator. It states that:

(1)The Company Liquidator may, with the sanction of the Tribunal, appoint one or more chartered accountants or company secretaries or cost accountants or legal practitioners or such other professionals on such terms and conditions, as may be necessary, to assist him in the performance of his duties and functions under this Act.

(2)Any person appointed under this section shall disclose forthwith to the Tribunal in the prescribed form any conflict of interest or lack of independence in respect of his appointment.

Section 293 of the Companies Act, 2013 deals with Books to be kept by Company Liquidator. It states that:

(1)The Company Liquidator shall keep proper books in such manner, as may be prescribed, 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 through his agent.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(ii) (Syllabus 2017).

Section 276 of the Companies Act, 2013 lays down that in case, the NCLT may remove the provisional liquidator or the Company liquidator, on any of the following grounds:

•Misconduct

•Fraud or misfeasance

•Professional Incompetence for failure to exercise due care and diligence in performance of the powers and functions

•Inability to act as provisional liquidator as the case maybe company liquidator

•Conflict of interest or lack of independence during the term of his appointment that would justify removal.

In the present case, the petition may be filed before the NCLT and not before the Hon’ble High Court as the same is within the powers of NCLT. The NCLT, for reasons to be recorded in writing , may remove the Mr. Jayant Nanda, the Company liquidator, if found guilty of giving preferential treatment to PQR Corporation by prioritizing its claims over those of other creditors and possibly negotiating assets sales at lower prices to benefit PQR Corporation.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6(c) (Syllabus 2022).

Section 276 of the Companies Act, 2013 lays down that the Tribunal may on reasonable cause being shown and for reasons to be recorded in writing, the tribunal may remove the provisional liquidator or the Company liquidator, on any of the following grounds:

a.Misconduct

b.Fraud or misfeasance

c.Professional Incompetence for failure to exercise due care and diligence in performance of the powers and functions

d.Inability to act as provisional liquidator as the case maybe company liquidator

e.Conflict of interest or lack of independence during the term of his appointment that would justify removal

Further, in the event of death, resignation or removal of the liquidator the tribunal may transfer the work assigned to him to another Company liquidator for reasons to be recorded in writing.

In the present case also, due to sudden demise of Mr. X, the Tribunal may transfer the work assigned to Late Mr X to another Company liquidator for reasons to be recorded in writing.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6A(ii) (Syllabus 2022).

Summary Procedure for liquidation

These rules allow following classes of companies to close their business by making a winding- up application to Central Government without going to NCLT.

*based on latest audited balance sheet.

In addition, companies having book value of assets up to Rs.1 Crore [currently specified under section 361(1)(i)] of the Companies Act, 2013, can also approach Central Government for liquidation.

The provisions of the Rules related to filing and audit of the Company Liquidator’s accounts and its procedure (rule 91 to 99 of the rules) and disposing of assets (rule 165 to 167 of the rules) shall be applicable to above class of companies with modification that the word ‘Tribunal’ shall be considered as ‘Central Government’.

Other procedural aspects are as under:

•The rules lay down the process for meeting of creditors and contributories of the company, and specify the scenarios in which creditors can vote.

•The rules make it necessary for all the money lying in the bank account of Company liquidator which is not immediately required for the purposes of winding up, to be invested in government securities or in interest bearing deposits in any scheduled bank.

•The rules lay down the procedure for maintenance of registers and books of accounts by the Company liquidator.

•The rules also outline the procedure for creditors to prove their debts and claims against the company and if the proof of such debt gets rejected by the Company liquidator, there is also a provision and process for creditor to make an appeal to Tribunal.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6A(iv) (Syllabus 2022).

Section 276 of the Companies Act, 2013 lays down that in case where the reasonable cause being shown and for reasons to be recorded in writing, the tribunal may remove the provisional liquidator or the Company liquidator, on any of the following grounds:

(a)Misconduct

(b)Fraud or misfeasance

(c)Professional incompetence or failure to exercise due care and diligence in performance of the powers and functions

(d)Inability to act as provisional liquidator or as the case may be, Company liquidator

(e)Conflict of interest or lack of independence during the term of his appointment that would justify removal

Further, in the event of death, resignation or removal of the liquidator the tribunal may transfer the work assigned to him or it to another Company liquidator for reasons to be recorded in writing

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 6(a) (Syllabus 2017).

Winding up is a means by which the dissolution of a company is brought about. The main purpose of winding up of a company is to realize the assets and pay the company’s debts expeditiously and fairly in accordance with the law. If any surplus is left, it is distributed among the members in accordance with their rights. The Companies Act, 2013 shall continue to govern winding up of companies on various grounds excluding inability to pay debts.

On promulgation of the Insolvency and Bankruptcy Code, 2016 the clause relating to ground of inability to pay their debts and provision relating to voluntary winding up of Companies have been deleted. Liquidation is defined as a process by which the life of a company is brought to an end in legal terms, after which it will be properly administered by a liquidator for the benefit of its creditors, members, and other stakeholders. The Insolvency and Bankruptcy Code also exclusively govern the insolvency resolution and liquidation of corporates.

Part II- Chapter III & Chapter V of the Insolvency and Bankruptcy Code, 2016 deals with Liquidation Process and Voluntary Liquidation of Corporate Persons respectively.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 4(d) (Syllabus 2017).

As per explanation to section 326 of the Companies Act, 2013 (Clause 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 the amount of workmen's dues and the amount of the debts due to the secured creditors.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 6(a) (Old syllabus).

A company liquidator has wide powers as stipulated in Sec 290 of Companies Act, 2013, including power to sell movable and immovable property, settle claims from creditors, employees etc.

However, such powers are not unquestionable. Under Sec 276, in the following cases, where reasonable cause being shown and for reasons to be recorded in writing, the Tribunal may remove the provisional Liquidator or Company Liquidator:

i.Misconduct

ii.Fraud or misfeasance

iii.Professional incompetence, or failure to exercise due care and diligence in performance of the powers and functions

iv.Inability to act as Provisional Liquidator or Company Liquidator, as the case may be

v.Conflict of interest or lack of independence during the term of his appointment that would justify removal

Besides, in the event of death, resignation or removal of the liquidator, the Tribunal may transfer the work assigned to him to another Company Liquidator for reasons to be recorded in writing.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 6(b) (Old syllabus).

According to section 281(1) of the Companies Act, 2013, where the Tribunal has made a winding up order or appointed a Company Liquidator, such liquidator shall, within sixty days from the order, submit to the Tribunal, a report containing the following particulars, namely:

(a)the nature and details of the assets of the company including their location and value, stating separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held by the company:

Provided that the valuation of the assets shall be obtained from registered valuers for this purpose;

(b)amount of capital issued, subscribed and paid-up;

(c)the existing and contingent liabilities of the company including names, addresses 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, addresses and occupations of the persons from whom they are due and the amount likely to be realized on account thereof;

(e)guarantees, if any, extended by the company;

(f)list of contributories and dues, if any, payable by them and details of any unpaid call;

(g)details of trademarks and intellectual properties, if any, owned by the company;

(h)details of subsisting contracts, joint ventures and collaborations, if any;

(i)details of holding and subsidiary companies, if any;

(j)details of legal cases filed by or against the company; and

(k)any other information which the Tribunal may direct or the Company Liquidator may consider necessary to include.

The Company Liquidator shall include in his report the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation or by any officer of the company in relation to the company since the formation thereof and any other matters which, in his opinion, it is desirable to bring to the notice of the Tribunal. [Section 281(2) of the Companies Act, 2013] The Company Liquidator shall also make a report on the viability of the business of the company or the steps which, in his opinion, are necessary for maximizing the value of the assets of the company. [Section 281(3) of the Companies Act, 2013]

Any person describing himself in writing to be a creditor or a contributory of the company shall be entitled by himself or by his agent at all reasonable times to inspect the report submitted in accordance with this section and take copies thereof or extracts there from on payment of the prescribed fees. [Section 281(5) of the Companies Act, 2013]

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 6A(i) (Old syllabus).

Section 276 of the Companies Act, 2013 lays down that in case where the reasonable cause being shown and for reasons to be recorded in writing, the tribunal may remove the provisional liquidator or the Company Liquidator, on any of the following grounds:

a.misconduct;

b.fraud or misfeasance;

c.professional incompetence or failure to exercise due care and diligence in performance of the powers and functions;

d.inability to act as provisional liquidator or as the case may be, Company Liquidator;

e.conflict of interest or lack of independence during the term of his appointment that would justify removal.

Further, in the event of death, resignation or removal of the liquidator the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 5(c) (Syllabus 2017).

The Companies Act, 2013 contain provisions for winding up of companies on various grounds including inability of companies to pay their debts in terms of section 271 thereof. On promulgation of the Insolvency and Bankruptcy Code, 2016 the clause relating ground of inability to pay their debts and provision relating to voluntary winding up of companies have been deleted. The code will exclusively be governing the insolvency resolution and liquidation of corporates.

The Companies Act, 2013 shall continue to govern winding up of companies on various other grounds excluding inability to pay debts, companies formed with an intention to defraud the society, threatening the sovereignty of state or union, not filling statutory returns or just and equitable reasons. Sections 270 to 288, Sections 290 to 303, Section 324 and Sections 326 to 365 of Chapter XX of the Companies Act, 2013 contain the provisions related to winding up of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6(b) (Old syllabus).

Section 274 of the Companies Act, 2013 lays down that in case, where the Tribunal is satisfied that on a petition that the winding up of the company is to be made out, it may by an order direct the company to file its objections along with a statement of its affairs within thirty days of the order which can be allowed a further period of thirty days in a situation of contingency or special circumstances.

In case of failure, the company and its directors may forfeit the right to file any objection and also liable for punishment of imprisonment and fine. For any prosecution for default by directors or officers of the Company, the complaint may be filed before the special court in terms of Section 274(5). As such, filing of Statement of Affairs by the directors is an absolute necessity in case the Company has objection points.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6A(i) (Syllabus 2017).

Section 333 of the Companies Act, 2013 deals with disclaimer of onerous property and it provides that:

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; or

(b)shares or stocks in companies; or

(c)any other property which is not saleable or is not readily saleable by reason of the possessor thereof being bound either to the performance of any onerous act or to the payment of any sum of money; or

(d)Unprofitable contracts.

2.The Company Liquidator may disclaim the onerous property in accordance with the provisions of this section, notwithstanding that he has

(a)endeavoured to sell such property; or

(b)taken possession of such property; or

(c)exercised any act of ownership in relation such property; or

(d)done anything in pursuance of any contract.

3.The conditions applicable for disclaiming the onerous property by the liquidator are:

(a)The Company Liquidator may disclaim the onerous property within 12 months after the commencement of the winding up or such extended period as may be allowed by the Tribunal.

(b)If the Company Liquidator had not become aware of the existence of any onerous property within 1 month from the, commencement of the winding up, the power of disclaiming the property may be exercised at any time within 12 months after he has become aware thereof or such extended period as may be allowed by the Tribunal.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 6A(i) (Old syllabus).

According to section 281(1) of the Companies Act, 2013, Company Liquidator shall submit to the Tribunal, a report containing the following particulars:

(a)the nature and details of the assets of the company including their location and value, stating separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held by the company:

Provided that the valuation of the assets shall be obtained from registered valuers for this purpose;

(b)amount of capital issued, subscribed and paid-up;

(c)the existing and contingent liabilities of the company including names, addresses 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, addresses and occupations of the persons from whom they are due and the amount likely to be realised on account thereof;

(e)guarantees, if any, extended by the company;

(f)list of contributories and dues, if any, payable by them and details of any unpaid call;

(g)details of trademarks and intellectual properties, if any, owned by the company;

(h)details of subsisting contracts, joint ventures and collaborations, if any;

(i)details of holding and subsidiary companies, if any;

(j)details of legal cases filed by or against the company; and

(k)any other information which the Tribunal may direct or the Company Liquidator may consider necessary to include.

The Company Liquidator shall include in his report the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation or by any officer of the company in relation to the company since the formation thereof and any other matters which, in his opinion, is desirable to bring to the notice of the Tribunal. [Section 281(2)].

The Company Liquidator shall also make a report on the viability of the business of the company or the steps which, in his opinion, are necessary for maximising the value of the assets of the company. [Section 281(3)].

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 4(a) (Syllabus 2017).

Winding-up under the Companies Act, 2013

The Companies Act, 2013 contain provisions for winding-up of companies on various grounds including inability of companies to pay their debts. The notification of the Insolvency and Bankruptcy Code, 2016 has deleted the provisions in the Companies Act, 2013 regarding winding-up of companies on the ground of inability to pay their debts and those relating to voluntary winding-up of companies and detailing the requirements for insolvency resolution of corporate persons and voluntary winding-up in the Code itself. The Code will exclusively be governing the insolvency resolution and liquidation of corporates.

The Companies Act, 2013 shall continue to govern winding-up of companies on various other grounds excluding inability to pay debts. Sections 270 to 288, Sections 290 to 303, Section 324 and Sections 326 to 365 of Chapter XX of the Companies Act, 2013 contain the provisions related to winding-up of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 6(c) (Old syllabus).

In case the Resolution Professional is unable to come-up with a resolution plan approved by at least sixty six percent of the Committee of Creditors or the plan submitted does not confirm the requirements of the Code, the Tribunal may pass an order of liquidation of the Corporate Debtor in terms of Section 33 of the Insolvency and Bankruptcy Code, 2016 so also in case the approved resolution plan is contravened by the Corporate Debtor. Apart from the above, Section 271 of the Companies Act, 2013 enumerates circumstances such as company’s own resolution, fraudulent or felony activities, default in filing financial statements or annual returns for more than 5 consecutive years or just and equitable reasons for which Tribunal may order liquidation. If the company has acted against the interests of the sovereignty and integrity of India, the security of the State then also it may be wound-up.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 6A(i) (Old syllabus).