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CENTRAL UNIVERSITY OF SOUTH, BIHAR

A PROJECT REPORT

ON

WINDING UP OF THE COMPANY BY TRIBUNAL

SUBMITTED BY- UNDER SUPRIVISION OF-

NAME:-Yashasavi Singh Dr. P.K.DAS {Ass. Prof., cusb}


E. N: - CUSB1513125050

SEM-8th

COURSE: B.A.LLB (H)


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INDEX

NUMBER TOPICS PAGE

1. AKNOWLEDGMENT 03

2. ABSTRACT 04

3. OBJECTIVE 04

4. METHODOLOGY 04
4. INTRODUCTION 05
5. MEANING OF WINDING UP OF THE COMPANY 05

6. WINDING UP OF THE COMPANY BY TRIBUNAL 06

7. CIRCUMSTANCES/GROUNDS BEFORE WOUND UP 06-08


OF THE COMPANY
8. POWER OF THE TRIBUNAL 09

10. PETITION FOR WOUND UP OF THE COMPANY 10-11


11. LIQUIDATON UNDER INSOLVENCY AND 11
BANCKRUPCY CODE,2016
12. CONCLUSION 12

13. SUGGESTIONS 13
14. BIBLIOGRAPHY 14
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ACKNOWLEDGMENT

At the outset, I would like to express my heartfelt gratitude and thank my teacher, Dr. P.K.Das for putting
his trust in me and giving me a project topic on “WINDING UP OF COMPANY BY THE
TRIBUNAL” such as this and for having the faith in me to deliver. sir, I wholeheartedly thank you for
giving me an opportunity which helped me to develop my knowledge in this interesting subject as well as
to grasp a better approach in dealing with this important branch of Law.

My gratitude also goes out to the staff and administration of CUSB for the infrastructure in the form of
library and IT Lab which was a source of great help for the completion of this project.

In the end, I feel it my utmost duty to extend my thanks to all my friends for helping me every time when
I found myself in some difficulties while completing this project. I am also indebted to the ideas of
various seniors whose works have been the source of inspiration and dedication in completing this paper.

YASHASAVI SINGH
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Abstract

This research paper deals about winding up of a company, compulsorily winding by the tribunal,
jurisdiction of tribunal and project also deals with power of tribunal. Winding up of a company
might be required because of various reasons including conclusion of business, misfortune,
bankruptcy, passing endlessly of promoters, and so forth. The methodology for winding up of a
company can be initiated intentionally by the shareholders or creditors or by a Tribunal itself. On
introduction of the winding up application, the court entertains petition and court has the power
to either reject it or to make an interim order or any other order as court thinks fit. Tribunal can
even appoint the temporary liquidator of the company till the passing of winding up arrange.
Finally tribunal may even make a request for winding up with or without cost. It is a procedure
by which the properties of the company are directed for the repayment of debt which company
has taken earlier and distribute the surplus among shareholders and creditors and other member
of the company. Winding up is called as Liquidation.

Objective

The main objective of research on ‘winding up of a company by tribunal’ is that it clears the
meaning of winding up of a company as well as explains need for winding up of company. this
study make us understand about the modes of winding up by tribunal, to find out provisions
regarding the voluntary winding up.

Methodology

The methodology used in this study is Doctrinal. It is based on the information and data collected
from secondary source. They include publication research, Journals, historical information of
both past and present. When a research is concerned with some legal problem, issue or question,
it is referred to as doctrinal, theoretical or pure legal research. Doctrinal research is a theoretical
study where mostly secondary source of data are used to seek to answer one or two legal
propositions or questions or doctrines. Its scope is very narrow and there is no such need of field
work.
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INTRODUCTION

Winding up of a company is defined as a process by which the life of company is brought to an


end and its property administered for the benefits of its members and creditors. In this research
paper the investigation is finished with the assistance of factual information taken from different
sources.

According to Halsburry's Laws of England, “Winding up is a proceeding by means of which the


dissolution of a company is brought about & in the course of which its assets are collected and
realised and applied in payment of its debts; and when these are satisfied, the remaining amount
is applied for returning to its members the sums which they have contributed to the company in
accordance with Articles of the Company.”Winding up is a legal process.

According to Prof. Gower’s definition of winding up “A winding up petition is a perfectly proper


remedy for enforcing payment of a just debt. It is the mode of execution which the Court gives to
a creditor against a company unable to pay its debts.

Section 433 to 483 of the Companies Act, 1956 manages the arrangements identifying with
winding up by court; voluntary winding up arrangements are expressed in section 484 to 520 of
the Organizations Act, 1956 and arrangements pertinent to each method of winding up are
administered by section 528 to 560 of the Companies Act, 1956. There are different manners by
which Companies presence arrives at an end. Another way is the striking off the name of the
company from the enlist of organizations kept up by Registrar under the arrangement of section
560 of the Companies Act, 1956.

 Meaning of winding up of company: -


(1) “Winding up is a means by which the dissolution of a company is brought about and
its assets are realised and applied in the payment of its debts. After satisfaction of the
debts, the remaining balance, if any, is paid back to the members in proportion to the
contribution made by them to the capital of the company.” “The liquidation or winding
up of a company is the process whereby its life is ended and its property is administered
for the benefit of its creditors and members. An Administrator, called a liquidator, is
appointed and he takes control of the company, collects its assets, pays its debts and
finally distributes any surplus among the members in accordance with their rights.”
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(2) As per Section 2(94A) of the Companies Act, 2013, “winding up” means winding up
under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016. Thus,
winding up ultimately leads to the dissolution of the company. In between winding up
and dissolution, the legal entity of the company remains and it can be sued in a Tribunal
of law In either case the company moves toward becoming vanishing company that at last
outcomes in the conclusion of the organizations.
 Meaning of winding up by the Court:-
Winding up a company by an order of the Tribunal is known as compulsory winding up.
Winding up by the court or obligatory winding up is initiated by application by method
for request of to fitting Court for a winding up arrange. Section 10 of the Companies Act,
1956 manages the purview of for entertaining winding up request. The High court has
locale in connection to the place at which the enrolled office of the company is arranged,
or The District Court in which locale has been vested either by the Act or by warning of
Central Government. GTC Industries Ltd v. Parasrampuria Trading1 it was held that
exclusive High Court where the enrolled office is arranged has ward in winding up,
regardless of whether there was assertion between gatherings will be settled under the
watchful eye of High Court where enlisted office isn't arranged.

Circumstance in which company may be wound by tribunal:-

Section 271 of the Companies Act, 2013 gives different grounds based on which a request of can
be filled in the Tribunal for the winding up of the company: Inability to pay debts: Subsection (2)
of section 271 gives that the inability to pay debts essentially emerge under three conditions.
Where the company neglects to clear the obligation of the creditor within three weeks instantly
preceding the date of demand for payment being made; Where execution or different process
issued on an announcement or request of any court for the company is returned unsatisfied in
entire or part; and Where it is demonstrated to the satisfaction of the court that the company is
unfit to pay its debts. A request of for winding up on the ground of inability to pay debts must
contain all the significant information about the obligation. The request of must unveil the

1
2001 104 compcas 368 All
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resources of the company and whether they are adequate to meet the liabilities including
contingent and forthcoming liabilities. Further, the request of must additionally uncover the
situation of settled resources and additionally valuation of plant and machinery of the company.
Where an obligation is true blue debated by the company and the court is fulfilled with the
company's resistance a winding up request won't be made.

In K. Appa rao v. Sarkar Chemicals (P) Ltd2 , the Andhra Pradesh High Court held that
where a company has an at first sight sustainable safeguard or a true blue question of its
commitments to release the asserted debts or liabilities, the court may not entertain proceedings
for the winding up, considerably less request winding up.

Under Section 271(1) a company may be wound up by the tribunal if-

1. Company is unable to pay the debts;


2. If the company has, by special resolution, resolved that the company be wound up by the
Tribunal;
3. If the company has acted against the interests of sovereignty and integrity of India,
4. The security of the State, friendly relations with foreign States, public order;
5. If the Tribunal has ordered the winding up of the company under Chapter XIX;
6. If on an application made by the Registrar or any other person authorized by the Central
Government by notification under this Act,
7. The tribunal is of opinion that affairs of the company have been conducted in a fraudulent
manner or the company was formed for fraudulent or unlawful purpose or the persons
concerned in formation misfeasance or misconduct in connection therewith and that it is
proper that company be wound up;
8. If the company has made default in filing with the Registrar its financial statements or
annual returns for immediately preceding five consecutive financial years;
9. If the tribunal is of the opinion that it is just and equitable that the company should be
wound up.

2
1995 84 Comp Case 670 AP
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 Inability to pay debts:- A company is deemed to be unable to pay the debts under
Section 271 (2) of the Companies Act, 2013 if a creditor to whom company has to pay an
amount exceeding Rs. 1 lakh has served a notice at the registered office of the company
by registered post or otherwise, which requires the company to pay the due amount and
the company has failed to pay the sum within 21 days or If any execution or other process
issued by decree of court or order in creditor’s favors is returned unsatisfied in whole or
in part or if the tribunal is satisfied that the company is unable to pay its debts and the
Tribunal shall take into account the contingent and prospective liabilities of the company
while determining whether the company is unable to pay its debts.
 Just & Equitable Grounds: - Court has complete discretion to decide just & equitable
grounds for winding up of a company. Some of the grounds on which court ordered the
winding up of company under this clause,
 When the object of the company was fraudulent,
 When substratum of the company has disappeared i.e. original object become
impossible to attain;
 The object for which the company is formed is illegal or becomes illegal by
change in law;
 The object for which company was incorporated has been completed;
 Deadlock in management due to differences among rival group and disagreement
cannot be resolved in general or board meeting;
 There has been mismanagement and misapplication of funds by directors of
private company.
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Powers of Tribunal

Section 273(1) Companies Act ,2013 provides The Tribunal may, on receipt of a petition for
winding up under section 272 pass any of the following orders, namely:-

(a) Dismiss it, with or without costs;

(b) Make any interim order as it thinks fit;

(c) Appoint a provisional liquidator of the company till the making of a winding up order;

(d) Make an order for the winding up of the company with or without costs; or

(e) Any other order as it thinks fit:

Provided that an order under this sub-section shall be made within ninety days from the date of
presentation of the petition: Provided further that before appointing a provisional liquidator
under clause (c), the Tribunal shall give notice to the company and afford 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.

Provided also 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 for an amount equal to or in excess of those
assets, or that the company has no assets.

Section 273(2) Companies Act, 2013 provides where a 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 the other remedy.
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PETITION FOR WINDING UP OF THE COMPANY

 WHO MAY FILL THE PETITION: - A petition for compulsory winding up of a


company may be filed in the Tribunal by any of the following persons (Sec. 272).
 Petition by the Company - A company can file a petition to the Tribunal for its
winding up when the members of the company have resolved by passing a
Special Resolution to wind up the affairs of the company. Managing Director or
the directors cannot file such a petition on their own account unless they do it on
behalf of the company and with the proper authority of the members in the
General Meeting.
 Petition by the Contributories - A contributory shall be entitled to present a
petition for the winding up of the 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 holders after the
satisfaction of its liabilities. It is no more required of a contributory making
petition to have tangible interest in the assets of the company.
 Petition by the Registrar - Registrar may with the previous sanction of the Central
Government make petition to the Tribunal for the winding up the company only
in the following cases:
(a) If the company has made a default in filing with the Registrar its financial
statements or annual returns for immediately preceding five consecutive financial
years;
(b) 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;
(c) If on an application made by the Registrar or any other person authorized by
the Central Government by notification under this Act, the Tribunal is of the
opinion that the affairs of the company have been conducted in a fraudulent
manner or the company was formed for fraudulent and unlawful purpose or the
persons concerned in the formation or management of its affairs have been guilty
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of fraud, misfeasance or misconduct in connection therewith and that it is proper


that the company be wound up.
 Petition by the Central Government or a State Government on the ground that
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.
 Any person authorized by the Central Government in that behalf.

Liquidation under Insolvency and Bankruptcy Code 2016

The Insolvency and Bankruptcy Code, 2016 relates to re-organization and insolvency resolution
of companies, partnership firms and individuals in a time bound manner. The Insolvency and
Bankruptcy Code, 2016 applies to matters relating to the insolvency and liquidation of a
company where the minimum amount of the default is Rs. 1 lakh (may be increased up to Rs.1 cr
by the Government, by notification).
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Conclusion

Winding up of a company is defined as a process by which the life of company is brought to an


end and its property administered for the benefits of its members and creditors. An administrator
called the liquidator is appointed and he takes control of the company collects its assets, pay
debts and finally distributes any surplus among the members in accordance with their rights.16
The Code and Regulations provide a favourable framework for companies and limited liability
partnerships. Though the process remains almost similar to previous regime, but the major
change has taken place in initiation of winding up process. Earlier, company or any of its
creditors could file a voluntary winding up petition but now company, directors, designated
partners or persons responsible for exercising its corporate powers can initiate the winding up
process. Moreover, approval of creditors representing two thirds of corporate debt is mandatory
under the Code for initiating voluntary winding up proceeding. To sum it up, now every
company who proposes to wind up is required to follow Insolvency and Bankruptcy Code, 2016.
The Code is quite comprehensive and wider as against Companies Act, 1956. It is expected that
Code would help in overcoming delays and complexities involved in the process due to presence
of four adjudicating authorities, High Court, Company Law Board, Board for Industrial and
Financial Reconstruction and Debt Recovery Tribunal. It would also lessen the burden on courts
as all the litigation will be filed under the Code. In a nutshell we can say that Winding up is a
proceeding by means of which the dissolution of a company is brought about & in the course of
which its assets are collected and realized and applied in payment of its debts; and when these
are satisfied, the remaining amount is applied for returning to its members the sums which they
have contributed to the company in accordance with Articles of the Company.
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Suggestions

Mounting cases in the court of law is a consequence of moderate development of legal


framework in the nation. Not at all like, different nations the advantage of liquidation and
winding up was not found in India. The ruin don being the moderate development of winding up
continuing which result in delay in the disintegration of the organizations. We are cheerful to see
the change which will be purchased by the constitution of NCLT and NCLAT. This ought to
decrease the pending cases identifying with winding up and liquidation of the company. The
move of the Government of the presentation of the Insolvency and Bankruptcy code, 2016 is
additionally ideal in diminishing the time taken in winding up procedures. The forces to pass
request of disintegration will be moved from courts to NCLT. In this way, the procedures of
winding up are relied upon to get quickened. It is cheerful to state that India could witness
development in tackling the winding up cases at a quick pace. In this way, the notorious winding
up procedures can get some force in India.
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BIBLIOGRAPHY

 REFERRED BOOKS

1. EXECUTIVE PROGRAMME COMPANY LAW, ICSI

2. DEREK FRENCH, APPLICATIONS TO WIND UP COMPANIES (2007)

3. AVTAR SINGH, COMPANY LAW (2009)

4. R.K.BANGIA, COMPANY LAW (2008)

5. DEREK FRENCH & RYAN, COMPANY LAW (2011)

 ARTICLES

1. ESSAY ON WINDING UP OF COMPANIES, available at http://jurisonline.in/?p=27589


(Last Visited on 24TH September, 2013)

2. THE ROLE OF LIQUIDATOR IN WINDING UP, available at


http://www.delhiol.com/databasefile/8ej (Last Visited on 24TH September, 2013)

 WEBSITES

1. http://www.companyliquidator.gov.in/12/windingup_data.htm

2. https://acadpubl.eu/hub
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