Winding-up by Tribunal under the Companies Act, 2013: formula sheet

Key formulas

Section 270 - mode of winding up

Winding up by Tribunal → Part I applies

Substituted w.e.f. 15-11-2016. The 2013 Act text speaks only of winding up by the Tribunal.

Section 280 - Tribunal's jurisdiction

Suits + Claims + Section 233 applications + Priorities and any question of law or fact

Overrides any other law. Covers matters begun before or after the winding-up order.

Section 290 - Company Liquidator's powers

Powers exercised subject to Tribunal directions and overall control

Includes carrying on business, selling assets or the undertaking, raising money, suing, settling claims, hiring professionals.

Section 343 - sanction of Tribunal

Pay a class of creditors in full; compromise with creditors; compromise calls and debts → with Tribunal sanction

Any creditor or contributory can apply to the Tribunal about an exercise or proposed exercise of these powers.

Section 360 - Official Liquidator

Powers as prescribed + any Company Liquidator power + inquiries if directed

Inquiries are on direction of the Tribunal or Central Government.

Section 226 - investigation

Investigation continues despite voluntary winding up resolution or pending winding-up proceedings

Applies also where a section 241 application is made. If the Tribunal passes a winding-up order, the inspector informs it of the pending investigation.

Grounds under section 271

(a) special resolution | (b) acts against sovereignty, security, public order, decency or morality | (c) fraud, on Registrar's or authorised person's application | (d) default in filing for 5 consecutive years | (e) just and equitable

Five grounds. The Tribunal acts on a petition under section 272 and has discretion.

Default ground

Default in filing financial statements or annual returns for the immediately preceding five consecutive financial years

Both the period (five years) and the word consecutive matter.

Fraud ground applicant

Application by the Registrar or a person authorised by the Central Government by notification

A creditor or member cannot use clause (c) alone.

Tribunal's powers on petition (section 273(1))

Dismiss | interim order | provisional liquidator | winding-up order | any other order. Order within 90 days of presentation of the petition

Notice to the company is needed before a provisional liquidator is appointed, unless dispensed with for recorded special reasons.

Mortgaged or no assets

Tribunal cannot refuse winding up only because assets are mortgaged for an amount equal to or above their value, or because the company has no assets

Third proviso to section 273(1).

Unregistered company (section 375)

Dissolved, ceased business or carrying on business only to wind up | unable to pay debts | just and equitable. No voluntary winding up

Deemed inability to pay debts: demand for a sum exceeding ₹1,00,000 unpaid for three weeks, among other tests.

Persons who can petition (Section 272(1))

Company | Contributory | Company and contributory together | Registrar | Person authorised by Central Government | Central or State Government (Section 271(b) cases)

Learn this as a list of six. The last one applies only to the sovereignty, security and public order ground.

Contributory holding test (Section 272(2))

Shares held and registered for at least 6 months during the 18 months before commencement of winding up, or devolved through death of a former holder

Original allotment also counts. Fully paid shares or lack of assets do not bar a contributory.

Registrar's petition (Section 272(3))

Any Section 271 ground except clause (a) + previous sanction of Central Government + reasonable opportunity to the company

The Government cannot sanction before the company has had a chance to make representations.

Company's petition (Section 272(4))

Admitted only if accompanied by a statement of affairs

Form and manner are prescribed by rules.

Copy to Registrar (Section 272(5))

Registrar submits views to Tribunal within 60 days of receipt

A copy of the petition must be filed with the Registrar.

Tribunal's powers (Section 273(1))

Dismiss | Interim order | Provisional liquidator | Winding up order | Any other order. Order within 90 days of presentation

Notice to the company is needed before appointing a provisional liquidator, unless dispensed with for special reasons recorded in writing.

Directions on petition by others (Section 274)

Objections plus statement of affairs within 30 days of order, extendable by a further 30 days

Failure means loss of the right to oppose the petition. Directors and officers responsible face punishment.

Commencement (Section 357)

Winding up deemed to commence at the time of presentation of the petition

This is the date from which the 18-month look-back is counted.

Tribunal's orders on a petition (s. 273(1))

Dismiss | interim order | provisional liquidator | winding up | any other order

Order must be made within 90 days from presentation of the petition.

Commencement (s. 357)

Winding up commences at the time of presentation of the petition

Not the date of the winding-up order.

Stay of suits (s. 279)

After order or provisional liquidator: no suit by or against the company without Tribunal's leave

Leave application to be disposed of within 60 days. Appeals pending before the Supreme Court or a High Court are excluded.

Intimation (s. 277)

Tribunal intimates Liquidator and Registrar within 7 days

Registrar endorses records, notifies Gazette and informs stock exchanges if listed.

Employees (s. 277(3))

Winding-up order = notice of discharge, unless business is continued

Applies to officers, employees and workmen.

Winding up committee (s. 277(4))

Application within 3 weeks of order; members: Official Liquidator, nominee of secured creditors, professional nominated by Tribunal

Company Liquidator convenes meetings and reports monthly to the Tribunal.

Effect on creditors (s. 278)

Order operates for all creditors and contributories as if on a joint petition

No single petitioner gains exclusive benefit.

Who can be Company Liquidator

Tribunal appoints an Official Liquidator or a liquidator from the panel at the time of the winding up order (Section 275(1)); provisional or Company Liquidator must be an insolvency professional registered under the IBC (Section 275(2))

Quote both sub-sections. Sub-section (2) is the 2016 substitution.

Declaration of independence

Declaration in the prescribed form within 7 days of appointment; the duty continues throughout the term (Section 275(6))

It discloses conflict of interest or lack of independence, if any, to the Tribunal.

Fees and terms

Fixed by the Tribunal on the basis of the task, experience, qualification of the liquidator and size of the company (Section 275(5))

The liquidator does not set his own fee.

Intimation of the order

Tribunal sends intimation to the liquidator and the Registrar within 7 days of the order (Section 277(1))

The Registrar endorses the records, notifies the Official Gazette, and informs the stock exchanges for a listed company.

Winding up committee

Liquidator applies within 3 weeks of the winding up order; members: Official Liquidator attached to the Tribunal, nominee of secured creditors, a professional nominated by the Tribunal (Section 277(4))

The liquidator is the convener of the committee (Section 277(5)).

Reporting

Monthly report with signed minutes to the Tribunal until the final report; the committee approves the draft final report; the Tribunal then passes the dissolution order (Section 277(6) to (8))

Remember the sequence: draft, committee approval, Tribunal.

Professional assistance

Chartered accountants, company secretaries, cost accountants, legal practitioners or other professionals may be appointed with the Tribunal's sanction (Section 291)

The appointee must disclose any conflict of interest forthwith.

Grounds for removal

Misconduct; fraud or misfeasance; professional incompetence or failure of due care; inability to act; conflict of interest or lack of independence (Section 276(1))

The Tribunal needs reasonable cause and written reasons, and must give the liquidator a hearing (Section 276(4)).

Intimation of order (s.277(1))

Tribunal order → intimation to liquidator and Registrar within 7 days

Registrar endorses records, notifies in the Official Gazette, and informs stock exchanges if the company is listed.

Winding up committee (s.277(4))

Application within 3 weeks of order; members: Official Liquidator + nominee of secured creditors + professional nominated by Tribunal

Company Liquidator is convener. Monthly report with signed minutes goes to the Tribunal until the final report.

Liquidator's report (s.281(1))

Report to Tribunal within 60 days from the order

Asset valuation must be obtained from registered valuers. Creditors and contributories may inspect the report and take copies on paying the prescribed fee.

Creditors' claims (s.363)

Official Liquidator calls for claims within 30 days of appointment; creditors prove within 30 days of receiving the call

Each creditor is told which claims are accepted or rejected, with written reasons.

Contributory liability limits (s.285(3))

Ceased member ≥ 1 year before winding up → not liable; no liability for debts contracted after exit; present members first; shares: limited to unpaid amount; guarantee: limited to amount undertaken

A guarantee company with share capital is also liable for unpaid share amounts.

Custody (s.283)

From winding-up order, all property and effects deemed in custody of the Tribunal

The liquidator takes physical custody or control on the Tribunal's order.

Workmen's portion of security

Workmen's portion = Value of security × Workmen's dues ÷ (Workmen's dues + Debts due to secured creditors)

This is the proportion in the Explanation to section 326. Illustration: ₹1,00,000 × 1,00,000 ÷ 4,00,000 = ₹25,000.

Secured creditor's pari passu claim

Claim = lesser of (unrealised secured debt) and (workmen's portion in his security)

Applies under section 326(1)(b) where the secured creditor has realised the secured asset. It ranks pari passu with workmen's dues.

Order of payment under section 326

Step 1: proviso sums (part of workmen's dues under Explanation clause (b)(i) and (ii), payable for two years, or such other prescribed period, preceding the winding up order) are paid in full in priority to all other debts, including secured creditors, subject to the prescribed charge over secured creditors' security → Step 2: the balance of workmen's dues and the secured creditor's shortfall or workmen's portion (whichever is less) are paid pari passu in full

Section 326(1) proviso and 326(2). The proviso sums are wages or salary (including commission) and compensation under the Industrial Disputes Act, 1947, and accrued holiday remuneration, all due to workmen. They are paid within thirty days of sale of assets and before any payment to secured creditors. If assets are insufficient for the Step 2 debts, they abate in equal proportions.

Section 327 debts among themselves

Rank equally; paid in full, else abate in equal proportions

Section 327(3)(a). Under section 327(3)(b), they also rank ahead of debentures under a floating charge if the assets for general creditors are insufficient. They do not rank ahead of fixed-charge secured creditors.

Relevant date

Date of appointment (or first appointment) of a provisional liquidator; if none, date of winding up order

Section 327 Explanation (c). Used to count the twelve-month and four-month periods.

Scope limit

Sections 326 and 327 do not apply to liquidation under the IBC

Section 327(7). Section 325 stands omitted.

Section 336 punishment

Imprisonment: 3 years to 5 years; Fine: ₹1,00,000 to ₹3,00,000

Both imprisonment and fine apply. The accused may plead absence of intent to defraud, conceal the true state of affairs or defeat the law, and must prove it.

Receiver of pledged property (section 336(2))

Imprisonment: 3 years to 5 years; Fine: ₹3,00,000 to ₹5,00,000

Applies to one who takes the property knowing it was pawned, pledged or disposed of in offending circumstances.

Fraudulent preference window (section 328)

Preference within 6 months before making the winding up application

The Tribunal may order restoration of the position or declare the transaction invalid.

Look-back for concealment offences

12 months before commencement of winding up, or at any time after

Applies to clause (d) acts such as concealing property of ₹1,000 or more or falsifying books.

Failure to report false debt

Failure to inform the Company Liquidator for 1 month

Offence under section 336(1)(f).

Winding up committee (section 277)

Application within 3 weeks of winding up order; members: Official Liquidator, nominee of secured creditors, professional nominated by Tribunal

The Company Liquidator is the convener. He places a monthly report with minutes before the Tribunal.

Intimation of order (section 277)

Tribunal intimates Company Liquidator and Registrar within 7 days

Registrar endorses records and notifies in the Official Gazette; for listed companies he intimates the stock exchanges.

Quick revision

• The Tribunal must send intimation of a winding up order or provisional liquidator appointment to the Company Liquidator or provisional liquidator, and the Registrar, within seven days.
• The Registrar endorses his records, notifies the Official Gazette and, for a listed company, informs the stock exchanges.
• A winding up order is deemed a notice of discharge to officers, employees and workmen, except when the business is continued.
• The Company Liquidator must apply within three weeks of the order for a winding up committee.
• The winding up committee has the Official Liquidator attached to the Tribunal, a nominee of secured creditors and a professional nominated by the Tribunal.
• The Company Liquidator is the convener of the committee and files monthly reports with signed minutes.
• The liquidator prepares the draft final report for committee approval, then submits it to the Tribunal for a dissolution order.
• Under section 282, the Tribunal fixes a time limit for completing the proceedings and may revise it if continuing is not advantageous or economical.
• The Tribunal may order sale of the company as a going concern, or of its assets, and may appoint a sale committee.
• Where fraud is reported, the Tribunal orders investigation under section 210 without prejudice to winding up.
• Section 327 debts rank equally, are paid in full, or abate in equal proportions if assets are insufficient.
• Sections 326 and 327 do not apply to liquidation under the IBC.

Common mistakes

• Writing that the Companies Act, 2013 still has three modes of winding up. Fix: Say that the 2013 Act text now deals with winding up by the Tribunal, and that voluntary winding up sections such as 308 and 309 are omitted w.e.f. 15-11-2016.
• Citing sections 308, 309 or 314 as the law on voluntary winding up. Fix: State that these sections are omitted. Refer to the IBC for voluntary liquidation.
• Listing inability to pay debts as a ground in section 271 for a company registered under the Companies Act, 2013. Fix: Write the five clauses of section 271. Mention inability to pay debts only for unregistered companies under section 375, and note corporate insolvency falls under the IBC.
• Saying any filing default allows winding up. Fix: State that the default must be in filing financial statements or annual returns for the immediately preceding five consecutive financial years.
• Saying a contributory cannot petition because his shares are fully paid or the company has no assets. Fix: Section 272(2) says he can petition despite fully paid shares, no assets, or no surplus assets. Only the holding-period test applies.
• Counting the six months from the date of the petition or from the winding up order. Fix: The shares must have been held and registered for at least six months within the eighteen months immediately before commencement of winding up. Commencement is the presentation of the petition under Section 357.
• Saying winding up commences on the date of the winding-up order. Fix: Remember section 357: commencement is the time of presentation of the petition.
• Saying the Tribunal must wind up once a petition is filed. Fix: List all five orders. The Tribunal can dismiss, pass interim orders or appoint a provisional liquidator.
• Treating the Official Liquidator and the Company Liquidator as identical. Fix: Say that the Official Liquidator is a whole-time Central Government officer (Section 359). Company Liquidator is the role in a given winding up, and an Official Liquidator or a panel liquidator can fill it.
• Writing that the Committee of Inspection supervises the liquidator under the 2013 Act. Fix: Write that the winding up committee under Section 277 assists and monitors. Mention the Committee of Inspection only as the former concept.

Exam tips

• Begin every answer with the section number and its key words. Examiners look for the provision first.
• In a mode-of-winding-up question, mention that the voluntary winding up sections are omitted and the IBC applies. This shows you know the current law.
• List the four limbs of section 280 in short bullets and tie each to a fact in the case.
• For liquidator questions, separate free powers (section 290) from sanctioned acts (section 343).
• Close with a conclusion and one practical step, such as applying to the Tribunal for directions.
• Write the section number and clause letter next to each ground. It shows precision.
• In case questions, quote the exact condition: five consecutive years, special resolution, or Registrar's application.
• Always add a line on Tribunal discretion and the alternative remedy under section 242 for just and equitable cases.