PROVISIONAL LIQUIDATOR (WINDING UP BY THE TRIBUNAL – IV)

[Mr. M. GOVINDARAJAN]

Appointment of Provisional Liquidator          

For the purposes of winding up of  a company on the order of the Tribunal, at the time of passing of the winding up order the Tribunal may appoint a provisional liquidator from amongst the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016.  The Tribunal may limit and restrict the 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.

Where the company is not the applicant, notice of the application for appointment of provisional liquidator shall be given to the company in Form WIN 7. The company shall be given a reasonable opportunity to make its representation unless the Tribunal, for reasons to be recorded in writing, dispenses with such notice.  The order appointing the provisional liquidator shall set out the restrictions and limitations, if any, on his powers imposed by the Tribunal. This order shall be in Form WIN 8, with such variations as may be necessary. This order for the appointment of a provisional liquidator 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.

The Registrar shall, within a period not exceeding seven days from the date of passing of the order, send intimation to the provisional liquidator in Form WIN 9 by registered post or by speed post or by courier service or by electronic means and a copy of the order for the appointment of provisional liquidator shall also be sent to the Registrar of Companies together with a copy of the petition and the affidavit, if any, filed in support thereof.  The copy of the order sent to provisional Liquidator shall be accompanied by a copy of the petition and the affidavit, if any, filed in support thereof if not already sent at the time of appointment of the provisional liquidator.

The provisional liquidator appointed by the Tribunal 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 Tribunal within seven days from the date of appointment.  A copy of the order made by the Tribunal shall also be filed by the liquidator within thirty days of the receipt with the Registrar of Companies in form INC-28 of the Companies (Incorporation) Rules, 2014.

Take over

On a winding up order being made, the provisional Liquidator shall, forthwith take into his custody or under his control all the properties and effects, actionable claims and the books and papers of the company.  It shall be the duty of all persons having custody of any of the properties, books and papers, cash or any other assets of the company, to deliver possession thereof to the provisional Liquidator. 

The company, its promoters, its key managerial personnel or any other person required to cooperate with the provisional liquidator does not so cooperate, the liquidator may make an application to the Tribunal for an appropriate order. The Tribunal shall direct the concerned to provide the information requested by the liquidator and to comply with the instructions of the liquidator and to cooperate with him in collection of information and taking custody of the assets, properties and books of accounts.

Report by liquidator

The Provisional Liquidator within 60 days from the order, submit to the Tribunal, a report containing the following particulars-

• the nature and details of the assets of the company including their location and value, stating separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held by the company; the valuation of the assets shall be obtained from registered valuers for this purpose;
• amount of capital issued, subscribed and paid-up;
• the existing and contingent liabilities of the company including names, addresses and occupations of its creditors, stating separately the amount of secured and unsecured debts, and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given;
• the debts due to the company and the names, addresses and occupations of the persons from whom they are due and the amount likely to be realized on account thereof;
• guarantees, if any, extended by the company;
•  list of contributories and dues, if any, payable by them and details of any unpaid call;
• details of trademarks and intellectual properties, if any, owned by the company;
• details of subsisting contracts, joint ventures and collaborations, if any;
•  details of holding and subsidiary companies, if any;
• details of legal cases filed by or against the company; and
• any other information which the Tribunal may direct or the Company Liquidator may consider necessary to include.

The Provisional Liquidator shall also make a report on the viability of the business of the company or the steps which, in his opinion, are necessary for maximizing the value of the assets of the company.  The Tribunal shall, on consideration of the report of the Company Liquidator, fix a time limit within which the entire proceedings shall be completed and the company be dissolved.

The Provisional Liquidator is also to submit periodical reports to the Tribunal.

Powers of Provisional Liquidator

The Provisional Liquidator has the following powers-

• to carry on the business of the company so far as may be necessary for the beneficial winding up of the company;
• to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents, and for that purpose, to use, when necessary, the company's seal;
• to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels;
• to sell the whole of the undertaking of the company as a going concern;
• to raise any money required on the security of the assets of the company;
• to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company;
• to invite and settle claim of creditors, employees or any other claimant and distribute sale proceeds in accordance with priorities established under this Act;
•  to inspect the records and returns of the company on the files of the Registrar or any other authority;
• to prove rank and claim in the insolvency of any contributory for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and ratably with the other separate creditors;
• to draw, accept, make and endorse any negotiable instruments including cheque, bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if such instruments had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business;
• to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the Company Liquidator to take out the letters of administration or recover the money, be deemed to be due to the Provisional Liquidator himself;
• to obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities and for protection of the assets of the company, appoint an agent to do any business which the Company Liquidator is unable to do himself;
•  to take all such actions, steps, or to sign, execute and verify any paper, deed, document, application, petition, affidavit, bond or instrument as may be necessary, —

• for winding up of the company;
• for distribution of assets;
• in discharge of his duties and obligations and functions as Company Liquidator; and

•  to apply to the Tribunal for such orders or directions as may be necessary for the winding up of the company.

Duties of Provisional Liquidator

The Provisional Liquidator shall perform the following duties in the course of winding up proceedings-

• The Provisional Liquidator shall prepare the list of contributories and file the same with the Tribunal.
• The Provisional Liquidator shall constitute an advisory committee and to conduct meetings
• The Provisional Liquidator shall maintain proper and regular books of account including accounts of receipts and payments made by him in such form and manner as may be prescribed.  These accounts are subjected to audit and comply with the provisions of Companies Act in relation to auditing and filing of returns etc.

Removal or replacement of provisional liquidator

The Tribunal may, on a reasonable cause being shown and for reasons to be recorded in writing, remove the provisional liquidator on any of the following grounds, namely-

• misconduct;
• fraud or misfeasance;
• professional incompetence or failure to exercise due care and diligence in performance of the powers and functions;
• inability to act as provisional liquidator or as the case may be, Company Liquidator;
• conflict of interest or lack of independence during the term of his appointment that would justify removal.

In the event of death, resignation or removal of the provisional liquidator the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing.

If the Tribunal is of the opinion that the provisional liquidator is responsible for causing any loss or damage to the company due to fraud or misfeasance or failure to exercise due care and diligence in the performance of his or its powers and functions, the Tribunal may recover or cause to be recovered such loss or damage from the provisional liquidator and pass such other orders as it may think fit.  Before passing any order under this section, the Tribunal shall provide a reasonable opportunity of being heard to the provisional liquidator.