Company Law and Practice · Compromise, Arrangement and Amalgamations - Concepts

Power of Tribunal to Enforce Compromise or Arrangement under Section 231

Updated 11 October 2026 · Fact-checked

Section 231 of the Companies Act, 2013 lets the Tribunal supervise a scheme it has sanctioned under section 230. It can give directions or modify the scheme for proper implementation. If the scheme cannot be implemented satisfactorily and the company cannot pay its debts as per the scheme, the Tribunal may order winding up.

Understand Power of Tribunal to Enforce Compromise or Arrangement

A scheme of compromise or arrangement does not end when the Tribunal sanctions it. Sanction under section 230 makes the scheme binding. The real work is carrying it out. Section 231 gives the Tribunal power to see that this happens.

The section has two parts. Sub-section (1) is about supervision and directions. When the Tribunal makes an order under section 230 sanctioning a scheme, it has power to supervise implementation. It may, at the time of the order or at any time afterwards, give directions on any matter or make modifications in the scheme that it considers necessary for proper implementation.

Sub-section (2) is about failure. If the Tribunal is satisfied that the scheme cannot be implemented satisfactorily, with or without modifications, and the company is unable to pay its debts as per the scheme, it may order winding up. That order is deemed to be made under section 273.

Note that both conditions in sub-section (2) must be met: the scheme cannot be implemented satisfactorily, and the company cannot pay its debts as per the scheme. Winding up is the last resort, after modification has been considered.

Sub-section (3) extends the section to a company where a compromise or arrangement was sanctioned by an order made before this Act commenced.

Key rules to remember

Supervision power: Section 231(1)(a): Tribunal shall have power to supervise implementation of the sanctioned scheme; Applies where the Tribunal has made an order under section 230 sanctioning the scheme.
Directions and modifications: Section 231(1)(b): directions on any matter or modifications, at the time of the order or at any time thereafter, as necessary for proper implementation; The test is necessity for proper implementation. The power is not unlimited in purpose.
Winding up on failure: Section 231(2): scheme cannot be implemented satisfactorily (with or without modifications) AND company unable to pay its debts as per the scheme → Tribunal may order winding up; Both conditions together. The word is 'may', so winding up is discretionary. The order is deemed made under section 273.
Earlier schemes: Section 231(3): section applies, so far as may be, to orders sanctioning a scheme made before commencement of the Act; Covers old sanctioned schemes too.

How to solve Power of Tribunal to Enforce Compromise or Arrangement questions

Use this method for any question on the Tribunal's power to enforce a sanctioned scheme.

1Check the starting point: has the Tribunal already sanctioned the scheme by an order under section 230? Section 231 works only after sanction.
2State the supervision power under section 231(1)(a) in one line.
3Identify the problem in the facts: is it a gap in implementation (use directions or modifications under section 231(1)(b)) or a failure of the scheme (use section 231(2))?
4For winding up, test both conditions: the scheme cannot be implemented satisfactorily even with modifications, and the company cannot pay its debts as per the scheme.
5Note that the Tribunal 'may' wind up. It has discretion, and modification comes first.
6State that a winding up order is deemed made under section 273.
7Conclude clearly: what the Tribunal can do on these facts, citing section 231 with the sub-section.

Quickest way: Two-track check: direct or wind up

When to use it: Use for short-answer or case questions with limited time.

Write: 'Under section 231(1), the Tribunal supervises a scheme sanctioned under section 230 and may give directions or modify it.'
Look at the facts. If the scheme is stuck but workable, conclude directions or modifications.
If the scheme has failed and the company cannot pay its debts under it, add section 231(2): winding up, deemed under section 273.
Finish with a one-line conclusion.

Common mistakes in Power of Tribunal to Enforce Compromise or Arrangement

Applying section 231 before the scheme is sanctioned
Students mix sections 230 and 231 because both deal with schemes.
Fix: Remember: section 230 sanctions, section 231 enforces. Section 231 starts only after the sanction order.
Saying the Tribunal must wind up whenever a scheme fails
Students overlook the word 'may'.
Fix: Write that the Tribunal 'may' order winding up, and only if both conditions in sub-section (2) are met.
Dropping the second condition for winding up
Students remember only 'cannot be implemented satisfactorily'.
Fix: Add that the company must also be unable to pay its debts as per the scheme.
Quoting the wrong section for the winding up order
Winding up has many sections in the Act.
Fix: Remember that an order under section 231(2) is deemed to be an order made under section 273.
Thinking directions can only be given when the scheme is sanctioned
Students read 'at the time of making such order' and stop.
Fix: The text adds 'or at any time thereafter'. Directions and modifications can come later too.

Worked examples

Example 1

The NCLT sanctioned a scheme of arrangement of Sundaram Textiles Ltd under section 230. Later, a dispute arose over how some creditors were to be paid under the scheme. Can the Tribunal intervene? Explain.

Show the solution

Provision: Under section 231(1), when the Tribunal sanctions a compromise or arrangement under section 230, it has power to supervise its implementation.
It may, at the time of the order or at any time thereafter, give directions on any matter or make modifications it considers necessary for proper implementation.
Analysis: The scheme is already sanctioned. The problem concerns its implementation, namely how creditors are paid. This falls within the supervision and direction power.
The facts do not say the scheme has failed or that the company cannot pay its debts under it, so section 231(2) is not attracted.

Answer: Yes. Under section 231(1), the Tribunal can supervise the scheme and give directions, or make modifications, as necessary for proper implementation, even after the sanction order.

Example 2

A scheme sanctioned under section 230 for Kaveri Engineering Ltd has run into trouble. The Tribunal finds that the scheme cannot be implemented satisfactorily, even with modifications, and the company cannot pay its debts as per the scheme. What can the Tribunal do?

Show the solution

Provision: Section 231(2) applies where the Tribunal is satisfied that the sanctioned scheme cannot be implemented satisfactorily, with or without modifications.
Second condition: the company must be unable to pay its debts as per the scheme.
Analysis: Both conditions are met on the facts.
Consequence: The Tribunal may make an order for winding up the company. Such an order is deemed to be an order made under section 273.
The word 'may' means the power is discretionary.

Answer: The Tribunal may order winding up of Kaveri Engineering Ltd under section 231(2). The order is deemed to be made under section 273.

Exam tips

Write section 231(1) and 231(2) separately: supervision and directions first, winding up second.
In winding up answers, always state both conditions and the word 'may'.
Mention that the winding up order is deemed made under section 273. It is an easy mark.
Link the answer to section 230: section 231 applies only to schemes sanctioned by the Tribunal under that section.
Use the ICSI answer pattern: provision, facts, conclusion.

Practice questions from Compromise, Arrangement and Amalgamations - Concepts

Power of Tribunal to Enforce Compromise or Arrangement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Power of Tribunal to Enforce Compromise or Arrangement: frequently asked questions

What is section 231 of the Companies Act, 2013?

It gives the Tribunal power to enforce a compromise or arrangement it has sanctioned under section 230. The Tribunal can supervise implementation, give directions and make modifications. It can also order winding up if the scheme fails.

Can the Tribunal give directions after the sanction order?

Yes. Section 231(1)(b) allows directions or modifications at the time of the order or at any time thereafter, as necessary for proper implementation of the scheme.

When can the Tribunal wind up a company under section 231?

When it is satisfied that the sanctioned scheme cannot be implemented satisfactorily, with or without modifications, and the company is unable to pay its debts as per the scheme. The Tribunal may then order winding up.

Under which section is the winding up order under section 231 deemed to be made?

It is deemed to be an order made under section 273.

Does section 231 apply to schemes sanctioned before the 2013 Act?

Yes, so far as may be. Section 231(3) applies the section to a company where an order sanctioning a compromise or arrangement was made before the Act commenced.