A company’s dissolution is the final stage of its existence. It is the process by which the company is terminated, i.e. the process by which its corporate existence ends and it is finally dissolved. A company can be wound up by a National Company Law Tribunal (“Tribunal”) or by voluntary winding up, according to section 270 of the Companies Act, 2013. There could be several reasons for quitting. The Companies (Winding Up) Rules, 2020 were notified by the Ministry of Corporate Affairs (“MCA”) on January 24, 2020, in order to systemize the procedure for winding up a company under the Companies Act, 2013.

The said Rules apply to “companies going into winding up for the circumstances mentioned in section 271″and “summary procedure for liquidation under section 361″of the Companies Act, 2013, and will take effect on April 1, 2020..


With the implementation of the Companies (winding up) Rules, 2020, the following types of companies can directly petition the central government for the winding up. These companies are exempt from filing a winding-up petition with the NCLT. Companies (winding-up) Regulations, 2020 The rules would apply to companies with a total outstanding deposit of less than Rs 25 lakh, a total outstanding loan of less than Rs 50 lakh, a turnover of less than Rs 50 crore, or a paid-up capital of less than Rs 1 crore. As a result, companies that fall within the specified threshold will require central government approval rather than NCLT approval for dissolution. Companies that fall outside of the specified threshold IS NOT AFFECTED..


The Rules are one of several steps taken by the government in recent months to reduce the burden of NCLT. Others include appointing additional members and occasionally establishing additional courts. According to the Ministry of Finance, five new NCLT benches were established during the 2018-19 fiscal year, and the government recently appointed 28 new NCLT and 4 NCLAT members. This step will also improve the ease of doing business by making the winding up procedure simpler, more cost-effective, and less time-consuming. The government has taken several steps to improve the ease of doing business, including the withdrawal of 14000 prosecutions under the Act and the decriminalisation of several penal provisions under the Act.

According to the Hon’ble Minister of State for Finance and Corporate Affairs, Mr. Anurag Singh Thakur, the number of cases pending at the National Law Company Tribunal as of 30th September 2019 was 19,771. This clearly demonstrates that the burden and pressure on the NCLT is enormous, and thus the government has taken a positive step by allowing summary liquidation procedures to be filed with the central government rather than the NCLT. However, it is unclear whether the step or process will be accelerated simply by shifting the jurisdiction because a significant portion of the procedure applicable to regular companies continues to apply to companies that can choose summary procedure.

For example, if the company’s creditors oppose the winding up but its shareholders want it dissolved, Rule 116 allows the creditor(s) who is/are aggrieved by the Company Liquidator’s call for winding up to file an appeal against his decision within 21 days of receiving notice of winding up.

The goal of the Rules is not only to reduce the burden from NCLT, but also to simplify and speed up the company’s winding up process. In one of the articles, the Vice-President of the NCLT Kolkata Bar Association stated that due to the overburdening of IBC cases, the disposition of company law cases is being slowed, resulting in a delay in providing justice to the companies.

The Rules require that the company be dissolved by an official liquidator (Rules 174 & 175 of the Rules), who is hired by the government and takes charge of the assets of the company that goes into liquidation under various provisions of the law (Rule 22 of Rules). The Rules require official liquidators to manage the resources of companies going into liquidation under various provisions of law (Rule 130 of the Rules), as well as the manner of selling assets under the guidance of the bankruptcy tribunal..


The Companies (winding up) Rules, 2020, introduced by the Ministry of Corporate Affairs, provided a summary of procedures for winding up companies that met the specified threshold limits.

The National Company Law Tribunal benefits significantly because it reduces the burden on NCLT in winding up companies that meet the specified threshold limits. Before winding up their businesses, those companies must obtain approval from the Central Government rather than the NCLT.

The rules aim to reduce the NCLT’s workload by allowing summary liquidation procedures to be filed with the central government.

Though the draught rules made this available only to small businesses, the final rules make it available to businesses with assets worth less than Rs 1 crore, no deposits exceeding Rs 25 lakh, no secured loans exceeding Rs 50 lakh, no turnover exceeding Rs 50 crore, and no paid-up capital exceeding Rs 1 crore. A large portion of the procedure that applies to regular companies remains applicable to companies that can choose the summary procedure. As a result, it is unclear whether the process will be accelerated simply by shifting jurisdiction to the central government.


Nikhil Mehta & Sons vs. AMR Infrastructures Ltd. The Principal Bench of NCLT ruled in Nikhil Mehta & Sons vs AMR Infrastructure Ltd. that the application would not be maintainable because many winding up petitions had been filed before the Hon’ble Delhi High Court. Even OL has been appointed as a provisional liquidator, despite the fact that the case is currently before the Appellate Bench with interim orders. The NCLT’s position in this matter was consistent with the provisions of Section 446 of the Act of 1956. The NCLT could not accept the insolvency application because the OL had already been appointed for the corporate debtor.

In the case of Alcon Laboratories (India) Private Limited vs. Vasan Health Care Private Limited, the court ruled in favour of the former. In the case of Alcon Laboratories (India) Private Limited vs Vasan Health Care Private Limited, the corporate debtor objected to the fact that the winding-up petition was pending before the Hon’ble High Court of Madras, and the Court allowed Andhra Bank to appoint a suitable person to conduct forensic audit of the corporate debtor. The NCLT ruled that the pending winding up petition under the IBC, 2016 is not a bar to initiating the corporate insolvency resolution process because the Hon’ble High Court has not issued an order for the corporate debtor’s winding up and no Official Liquidator has been appointed. As a result, the raised objection was rejected.


Companies (Winding up) Rules 2020, which were introduced by the Ministry of Corporate Affairs on January 24, 2020, have resulted in significant changes in the process of company winding up, reducing the burden of the tribunal and providing exit opportunities to classes of companies. Tribunals should only issue a winding-up order when all other options have been exhausted; otherwise, they should advise companies to revise or restore their companies.



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