SECTION 301 OF COMPANIES ACT 2013: ARREST OF PERSON TRYING TO LEAVE INDIA OR ABSCOND
The rules of Section 301 go into effect on December 15th, 2016. You can refer to the S.O. 3677(E) notification, which was released on 7/12/2016. You will discover in-depth information about the provisions of Section 301 of the 2013 Companies Act in this article.
Section 301 will take effect on December 15, 2016, as follows: S.O. 3677(E) notification number, dated 07.12.2016.
If the Tribunal is convinced that a contributory or a person in possession of the company’s property, accounts, or papers is about to leave India or otherwise to abscond, or is about to remove or conceal any of his property, for the purpose of avoiding payment of calls or avoiding examination regarding the company’s affairs, the Tribunal may cause—
(a) The contributory will be held until the Tribunal issues a ruling; and
(b) the Tribunal may order that his books, papers, and personal belongings be confiscated and maintained in a secure location.
WINDING UP BY TRIBUNAL UNDER THE COMPANIES ACT 2013
According to section 270 of the Companies Act of 2013 (Act), the tribunal may be dissolved in one of two ways. According to Section 270, a firm may be wound up involuntarily or by the tribunal.
- Reasons for the Tribunal to wind up.
- The tribunal has the power to dissolve a firm.
- When a business is unable to pay its debts.
If the company has decided through a special resolution to be dissolved by the Tribunal.
- If the business acted in a manner that was detrimental to India’s sovereignty, integrity, security, friendly relations with other countries, public order, morality, or decency.
- If the company has been deemed sick and the Tribunal has ordered its winding up under Chapter XIX.
- If the Tribunal determines that it is appropriate to wind up the company after receiving a request from the Registrar or the Government and that the company’s affairs have been run dishonestly, that it was founded with dishonest and illegal intent, or that those involved in its formation or management have engaged in fraud, mismanagement, or misconduct in connection therewith.
Insolvency and Bankruptcy Code Amendments of 2016 (IBC)
Later, the Insolvency and Bankruptcy Code, 2016 (IBC) took the place of the Act of 2013 and brought about amendments such
- The IBC liquidator is included in the definition of a corporate liquidator.
The Act’s voluntary winding up provisions were removed, and IBC added them.
The businesses that had committed any such defaults were ineligible to apply for voluntary liquidation.
- if the business failed to file its annual reports or financial statements with the Registrar for the five fiscal years that came before; or
- if the tribunal determines that closing the company is just and equitable.
- According to IBC, a default is when a debt is not paid in full or in part even when interest has been accruing.
- The Act prohibits the National Company Law Tribunal from filing any petitions for winding up. A creditor is no longer eligible to file a petition for winding up with the tribunal under Section 272 of the Act. As required by IBC, an adequate remedy is offered.
POWER TO TRIBUNAL
Section 273 of the Act defines the Tribunal’s powers. Which states that the tribunal may issue orders such as these after receiving a petition for winding up.
- Dismiss it with or without costs; make any interim orders it sees fit;
- name a provisional liquidator of the company until a winding up order is made; or
- make any other orders it sees fit, including an order for the firm’s winding up with or without costs.
- Such an order must be issued within 90 days after the petition’s presentation date. Prior to appointing a provisional liquidator, the tribunal must notify the company and give it a chance to state its case.
When the tribunal issues the order of winding up, certain individuals selected by the tribunal are responsible for appointing an official liquidator or a liquidator from the panel retained as the company liquidator. Section 275 of the Act defines the terms “business liquidator” and “third appointment.” Chartered accountants, attorneys, company secretaries, cost accountants, and other experts are included on the roster that the central government maintains to select such liquidators. The tribunal shall specify all of the terms and conditions of the company liquidator’s appointment in the company’s winding-up process as well as the fees due based on the tasks requested as well as the experience, qualifications, and size of the company.
REMOVAL AND REPLACEMENT OF LIQUIDATOR
The Code also includes provisions for removal and replacement. According to section 276 of the Act, the liquidator may be dismissed for any of the following reasons upon showing a sufficient cause and for reasons to be set forth in writing.
- fraudulent behavior.
- professional incompetence or failing to use reasonable care and diligence in exercising authority or performing duties.
- inability to serve as a company liquidator or a provisional liquidator, as applicable.
- There must have been a conflict of interest or a lack of independence during his appointment that would have justified removal.
EFFECT OF WINDING UP ORDER
According to Section 278 of the Act, the impact of a winding-up order is that the company must proceed in the best interests of all of its creditors and contributors as though the order had been set out on a joint petition of both parties. The tribunal further orders that an advisory committee be established for the company liquidator’s assistance. The advisory committee will periodically offer the company liquidator advice and assist in improving the report that will be submitted to the tribunal. Section 287 of the Act defines the advisory committee.
Such a committee has the authority to examine the assets, other properties, and other documents and books of accounts. According to section 288 of the Act, the corporate liquidator must provide regular reports to the tribunal in line with and on the recommendation of the advisory committee. Such a report details the company’s winding-progress. up’s
Section 294 further defines an audit for the company liquidator’s account in order to establish a fair and justifiable approach to winding-up. The provision specifies that the liquidator must also keep accurate and consistent books of account, including a record of his own receipts and payments.
Therefore, a winding up by a tribunal is a required winding up that safeguards the interests of a company’s unpaid creditors. It is a helpful clause that supports and defends ethical business practices and transactions as outlined in Indian company law.
THE COMPANIES ACT,2013.
THE NEW COMPANY LAW (Dr. N.V. Paranjape).
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