According to the Companies Act, 2013 there are two ways in which a company can be wound up. First, by way of voluntary winding up and second through the tribunal. In the whole process of winding up of the company, the sections of the Companies Act, 2013 are to be read with the National Company Law Tribunal Rules, 2016.
Grounds for winding up of a Company by Tribunal
According to Section 271 of the Act a company may require to wind up through tribunals on the happening of the following circumstances-
- If the company, by the way of special resolution, has resolved to wound up the company then it can be wounded up by the tribunal.
- A company can be wounded up by the tribunal in case when company acts against the sovereignty and integrity of India or against the security of the state or public order, decency, morality.
- In case the company fails to submit annual returns and financial statements of the last five financial years continuously then the registrar made the company defaulter n liable for winding up.
- If the tribunal thinks that, the company is unable to pay debts. Inability to pay debts is construed in section 271(2) of the Act.
- If the tribunal has considered to wind up the company because it is a sick company under chapter 19.
- If the tribunal is of the opinion that the company has done something fraudulently or unlawful purpose for which the company. This clause can be activated by the registrar or any person who is going to complain regarding the affairs of the company.
- If the tribunal is of the opinion that it is just and equitable for the company to wind up.
Petition for Winding Up
According to section 272 of the Act, it is necessary to file a petition to the Tribunal for winding up of a company. The petition can be filed by the company, Creditors of the company holding debentures might be a trustee or not a trustee have appointed, Shareholders or the contributors of the company who is a holder of the paid-up shares, Contingent or prospective creditors whose debts are unpaid, Registrar, Liquidators, the person authorized on behalf of the state or central government.
The petition, shall be filed in form as provided in Form No. NCLT. 1. Any attachments have to be accompanied in Form No. NCLT. 2. Every petition , application or reference has to be verified by an affidavit in Form No. NCLT. 6 (Rule 34).
As per Section 273, the Tribunal on receipt of such petition for winding up the company, shall pass an order within 90 days from the date of the presentation of petition. Tribunal can dismiss the petition or can pass an interim order, appoint a provisional liquidator, make an order for winding up or make any other order in its regard. If the tribunal does not dismiss the petition, then it should give notice to the opposite party before appointing a provisional liquidator and give them opportunity to make their representations. Such notice has to be provided in Form No. NCLT. 5.
As per Section 274, if the tribunal is satisfied that it is the prima facie case for the winding up of the company, the tribunal may by order direct the company, which is bound to be wound up, to file its objections along with a statement of affairs within 30 days of the order. The tribunal may also grant extension of 30 days in special circumstances.
If an order for winding up has been passed by the Tribunal, the directors and other officers of the company have to submit the complete and audited books of accounts of the company within 30 days of such order being passed by the tribunal to the provisional liquidator. If the requirement is contravened, the director or officer shall be liable for fine and imprisonment under Section 274 (4).
The tribunal shall appoint a provisional liquidator or a company liquidator at the time of passing an order for winding up of the company. As per Section 275 of the Act, on appointment of such provisional or company liquidator, such liquidator shall file a declaration within 7 days from the date of appointment about any conflict of interest or lack of independence in respect of his appointment.
The tribunal may appoint the provisional liquidator as the company liquidator for the conduct of proceedings for the winding up of a company. As per Section 276, the liquidator so appointed can also be removed and replaced for reasons of misconduct or fraud or misfeasance or professional incompetence etc.
The tribunal after appointing a provisional liquidator or passing an order for winding up, the tribunal then within 7 days from the date of passing such order, intimate the same to the liquidator and the registrar.
As per Section 277 the registrar shall notify in the official gazette about the company being wound up. Then the official liquidator within three weeks shall make an application to the tribunal for the constitution of the Winding-up Committee which provides the report on monthly basis and then a final report is submitted to the tribunal after the dissolution of company.
As suggested under Section 279, after the winding up of a company, no suits and legal proceedings can be entertained against the company. The tribunal has jurisdiction to dispose of cases of the pending cases of the company under Section 280.
As per Section 281, the liquidator has to submit the final report to the tribunal within 60 days of the winding up of a company. Under Section 282 further, the entire proceedings for the dissolution have to be completed in a specified time.
The company is liable to sell all the assets and pay to creditors first then remaining to the shareholders. If the company has involved in fraud, then criminal proceedings will take place against the persons involved in the fraudulent activities.
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