FILING OF APPLICATION FOR WINDING UP - WINDING UP OF A COMPANY – I

[Mr. M. GOVINDARAJAN]

Introduction

Chapter XX of the Companies Act, 2013 (‘Act’ for short) provides the procedure of winding up of a company.  Chapter XX contains four Parts as detailed below-

• Part I – Winding up by a Tribunal – Sections 271 – section 303;
• Part II – Voluntary winding up – Sections 304 – Section 323 – repealed by Insolvency and Bankruptcy Code, 2016 – Eleventh Schedule;
• Part III – Provisions applicable to every winding up of a company – Sections 324 – Section 358;
• Part IV – Official Liquidator – Section 359 – Section 365.

When a company may be wound up?

A company may be wound up under the following circumstances-

• if the company has, by special resolution, resolved that the company be wound up by the NCLTl;
• 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;
•  if on an application made by the Registrar or any other person authorized by the Central Government by notification under this Act, if 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 of fraud, misfeasance or misconduct in connection therewith;
• 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.

Who can file a petition for winding up?

The following are eligible to file a petition before the National Company Law Tribunal (‘NCLT’ for short) for winding up a company-

• the company;
• any contributory or contributories;
• the Registrar;
• any person authorized by the Central Government in that behalf;
• 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, by the Central Government or a State Government.

Petition

A petition for winding up of a company shall be presented in Form WIN 1 or Form WIN 2, as the case may be, with such variations as the circumstances may require, and shall be presented in triplicate. The petition shall be verified by an affidavit in Form WIN 3 by the petitioner.  In case the petition is presented by a body corporate, the affidavits shall be verified by the Director, Secretary or any other authorized person thereof.  Every contributory of the company shall be entitled to be furnished by the petitioner or by his authorized representative with a copy of the petition within 24 hours of his requiring the same on payment of Rs.5/- per page

The statement of affairs shall be filed in Form WIN 4 and shall contain information up to the date which shall not be more than 30  days prior to the date of filling the petition or filling the objection as applicable and the statement of affairs shall be made in duplicate, duly verified by an affidavit, and affidavit of concurrence of the statement of affairs shall be in Form WIN 5. If the petition is made by a person other than the company then NCLT may direct the company to file the Statement of Affairs of the Company within 30 days.  The NCLT may allow a further period of 30 days in a situation of contingency or special circumstances.  The NCLT may direct the petitioner to deposit such security for costs as it may consider reasonable as a precondition to issue directions to the company.

 A copy of the petition shall also be filed with the Registrar. The Registrar shall, without prejudice to any other provisions, submit his views to the NCLT within 60 days of receipt of such petition.

Admission of petition

Upon filing of the petition, the NCLT shall directs to the advertisements as to the publication of advertisement.  If the petition has been filed by a person other than the company, the NCLT may, if it thinks fit, direct notice to be given to the company and give an opportunity of being heard, before giving directions as to the advertisement of the petition, if any.  The petitioner shall bear all costs of the advertisement.

The notice of the petition shall be advertised not less than 14 days before the date fixed for hearing in any daily newspaper in English and vernacular language widely circulated in the State or Union territory in which the registered office of the company is situated, and the advertisement shall be in Form WIN 6.

Withdrawal of petition

A petition for winding up shall not be withdrawn after presentation without the leave of the NCLT subject to compliance with any order of the NCLT, including as to costs.  An application for leave to withdraw a petition for winding up which has been advertised in accordance with the provisions of rule 7 shall not be heard at any time before the date fixed in the advertisement for the hearing of the petition.

Substitution of original petitioner

Where in the opinion of the NCLT there is other sufficient cause for an order being made under this rule, the NCLT may, upon such terms as it may think just, substitute as petitioner any other person who, in the opinion of the NCLT, would have a right to present a petition, and who is desirous of prosecuting the petition.

Objections

Any affidavit in objection to the petition shall be filed within 30 days from the date of order. A copy of the affidavit shall be served on the petitioner or his authorized representative forthwith and copies of the affidavit shall also be given to any contributory appearing in support of the petition who may require the same on payment of Rs.5/- per page within 3 working days.

Reply

An affidavit in reply to the affidavit in objection to the petition shall be filed not less than 7 days before the day fixed for the hearing of the petition, and a copy of the affidavit in reply shall be served on the day of the filing thereof on the person by whom the affidavit in objection was filed or his authorized representative.

Order

The NCLT may, on receipt of a petition for winding up  pass any of the following orders-

• dismiss it, with or without costs;
•  make any interim order as it thinks fit
• appoint a provisional liquidator of the company till the making of a winding up order;
• make an order for the winding up of the company with or without costs; or
•  any other order as it thinks fit.

Such an order shall be made within 90 days from the date of presentation of the petition.

Rejection

The NCLT 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.

Where a petition is presented on the ground that it is just and equitable that the company should be wound up, the NCLT 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.

Provisional liquidator

For the purposes of winding up of a company by the NCLT, the NCLT at the time of the passing of the order of winding up, shall appoint a provisional liquidator.  The provisional liquidator shall file a declaration in Form WIN 10 disclosing conflict of interest or lack of independence in respect of his appointment, if any, with the NCLT within seven days from the date of appointment.  The NCLT may limit and restrict powers of provisional liquidator by the order appointing him or it or by a subsequent order, but otherwise he shall have the same powers as a liquidator.  The fee payable to him or it shall be specified by the NCLT on the basis of task required to be performed, experience, qualification of such liquidator and size of the company.

Effect of winding up order

The winding up order shall be deemed to be a notice of discharge to the officers, employees and workmen of the company, except when the business of the company is continued.  The order for the winding up of a company shall operate in favour of all the creditors and all contributories of the company as if it had been made out on the joint petition of creditors and contributories.  The provisional order shall also state that it will be the duty of every person, who is in possession of any property, books or papers, cash or any other assets of the company, including the benefits derived therefrom, to surrender forthwith such property, books or papers, cash or other assets and the benefits so derived, as the case may be, to the provisional liquidator.