Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

Sanction of Scheme under Section 262 of the Companies Act

Updated 11 October 2026 · Fact-checked

Section 262 of the Companies Act, 2013 dealt with the Tribunal's sanction of a revival and rehabilitation scheme for sick companies. It was omitted with effect from 15 November 2016. Sick company revival now sits under the Insolvency and Bankruptcy Code. Sanction of mergers and arrangements is governed by sections 230 and 232.

Understand Sanction of Scheme under Section 262

Start with the key fact. The official text of the Companies Act, 2013 shows section 262 titled "Sanction of scheme" as omitted by section 255 and the Eleventh Schedule, with effect from 15-11-2016. Sections 254 (application for revival and rehabilitation) and 261 (scheme of revival and rehabilitation) were omitted in the same way.

These provisions sat in the Chapter on revival and rehabilitation of sick companies. They were meant to let the Tribunal examine a sick company, approve a rehabilitation scheme and sanction it. They never came into force in practice and were removed when the Insolvency and Bankruptcy Code took over the field. So in a written exam, you must not describe section 262 as a working provision.

So how does the Tribunal sanction a scheme today? Through sections 230 to 232. Under section 232, the Tribunal orders meetings of creditors or members, checks that the procedure in sub-sections (1) and (2) is complied with, and then may sanction the scheme by order. The sanction order can provide for transfer of undertaking, property and liabilities, allotment of shares, continuation of legal proceedings, dissolution of the transferor without winding up, dissent provisions and employee transfer.

The Tribunal can also attach conditions. Section 459 lets the Tribunal give approval or sanction subject to such conditions, limitations or restrictions as it thinks fit, and withdraw the approval if a condition is breached. Use this when a question asks about the conditions and powers of the Tribunal.

In exams, treat this topic as a trap and a bridge. Show you know section 262 is omitted, then answer the real question using section 232 and section 459.

Key rules to remember

Status of section 262: Section 262 (Sanction of scheme) = omitted w.e.f. 15-11-2016; Omitted by section 255 and the Eleventh Schedule. Sections 254 and 261 are omitted the same way.
Tribunal's sanction power for mergers: Section 232(3): Tribunal, after satisfying itself that sub-sections (1) and (2) are complied with, may sanction the scheme; Sanction is discretionary ("may"), not automatic.
Auditor's certificate proviso: No sanction unless the company's auditor certifies the accounting treatment conforms to accounting standards under section 133; Certificate must be filed with the Tribunal.
Appointed date: Section 232(6): scheme must state an appointed date and is effective from that date, not a later one; Do not confuse with the effective date of the order.
Filing of order: Certified copy of order filed with Registrar within 30 days of receipt (section 232(5)); Default: penalty of ₹20,000 on company and each officer in default, plus ₹1,000 per day after the first, maximum ₹3 lakh (section 232(8)).
Conditions on sanction: Section 459(1): approval or sanction may be given subject to conditions, and withdrawn on breach; General power of the Tribunal and Central Government.
Annual compliance statement: Section 232(7): until completion, file yearly statement certified by CA, cost accountant or CS in practice; States whether the scheme is complied with as per Tribunal orders.

How to solve Sanction of Scheme under Section 262 questions

Use this method for any question on sanction of a scheme. It protects you from relying on an omitted section.

1Read the question and check which section it names. If it names section 262, 261 or 254, note that these are omitted w.e.f. 15-11-2016.
2Identify the real scheme type: merger, amalgamation, division, compromise or arrangement. This decides whether section 230 or 232 applies.
3State the procedure the Tribunal must see complied with: meetings ordered, draft scheme circulated, Registrar filing confirmation, directors' report, valuation report, supplementary accounts if needed.
4Apply the facts: check whether each document was circulated and the auditor's certificate filed.
5State the Tribunal's power: it may sanction by order and provide for transfer, allotment, pending proceedings, dissolution, dissenters and employees.
6Mention conditions under section 459 if the facts show a conditional approval.
7Conclude: sanction granted or refused, then post-order steps: filing within 30 days, appointed date, annual statement.

Quickest way: Omitted-section-first answer

When to use it: Use when time is short and the question names section 262 directly.

Write one line: section 262 is omitted w.e.f. 15-11-2016.
Write one line: sanction today is under section 232(3) after compliance with 232(1) and (2).
List the sanction order contents from 232(3)(a) to (j) in a few bullets.
Add section 459 conditions and the 30-day filing duty.
Close with a one-line conclusion on the facts.

Common mistakes in Sanction of Scheme under Section 262

Writing that section 262 is currently in force and describing its procedure.
Older notes and bare-act headings still list the section title.
Fix: Always state it is omitted w.e.f. 15-11-2016 and move to section 232.
Treating the Tribunal's sanction as automatic once shareholders approve.
Students focus on majority votes and forget the Tribunal's role.
Fix: Remember section 232(3) says the Tribunal "may" sanction after satisfying itself on procedure.
Forgetting the auditor's certificate on accounting treatment.
It sits in a proviso at the end of sub-section (3).
Fix: Tie it to section 133 accounting standards and note it must be filed with the Tribunal.
Mixing up the 30-day filing period and the penalty amounts.
Several numbers appear together.
Fix: Learn: 30 days; ₹20,000; ₹1,000 per day after the first; cap ₹3 lakh.
Saying the scheme takes effect from the date of the Tribunal's order.
Confusion between order date and appointed date.
Fix: Section 232(6) makes it effective from the appointed date stated in the scheme.

Worked examples

Example 1

A student writes that under section 262 the Tribunal sanctions a scheme of revival and rehabilitation of Nirmal Textiles Ltd, a sick company. Evaluate this statement and state how Tribunal sanction is obtained for a merger of Nirmal Textiles Ltd into Bharat Fabrics Ltd.

Show the solution

Check the provision: section 262 is omitted by section 255 and the Eleventh Schedule w.e.f. 15-11-2016. The statement is wrong.
Identify the scheme: a merger by absorption, as Nirmal's undertaking, property and liabilities pass to an existing company.
Apply section 232(1): on an application under section 230, the Tribunal may order meetings of creditors or members.
Apply section 232(2): circulate the draft scheme, Registrar filing confirmation, directors' report on share exchange ratio, valuation report if any, and supplementary accounts if the last accounts end more than six months before the first meeting.
Apply section 232(3): after being satisfied, the Tribunal may sanction by order, with auditor's certificate on accounting treatment filed.
Post-order: file the certified copy with the Registrar within 30 days.

Answer: The statement is incorrect because section 262 is omitted. The merger is sanctioned by the Tribunal under section 232(3) after the section 232(1) and (2) procedure is complied with.

Example 2

The Tribunal sanctions a merger scheme of Kaveri Foods Ltd with Sagar Foods Ltd subject to a condition. Sagar Foods Ltd breaches it. Also, it receives the certified copy of the order on 1 March and files it with the Registrar 10 days late, i.e. on the 40th day. Advise on the consequences.

Show the solution

Condition: section 459(1) allows the Tribunal to sanction subject to conditions and, on contravention, to rescind or withdraw the sanction.
So the Tribunal may withdraw its sanction because of the breach.
Filing: section 232(5) requires filing within 30 days of receipt. Filing on day 40 is 10 days late.
Penalty under section 232(8): ₹20,000 on the company and each officer in default.
Continuing default: a further ₹1,000 for each day after the first. Here the failure continued for 10 days, so 9 days after the first day: 9 × ₹1,000 = ₹9,000.
Total per person liable: ₹20,000 + ₹9,000 = ₹29,000, well under the ₹3 lakh cap.

Answer: The Tribunal may rescind or withdraw the sanction under section 459(1). For the 10-day delay, the company and each officer in default face a penalty of ₹29,000 each.

Exam tips

Open any section 262 question with the omission fact and date; this earns the provision mark.
Pivot to section 232 and name its sub-sections, since graders look for correct provision numbers.
Learn the contents of the sanction order (a) to (j) as a short list and use it in analysis.
In case-based questions, check every circulated document against section 232(2) before concluding.
Close with compliance points: 30-day filing, appointed date and annual statement.

Practice questions from Regulatory Approvals of Scheme

Sanction of Scheme under Section 262: frequently asked questions

Is section 262 of the Companies Act, 2013 in force?

No. Section 262 is shown as omitted by section 255 and the Eleventh Schedule, with effect from 15-11-2016. Sections 254 and 261 on revival and rehabilitation were omitted in the same way.

Who sanctions a merger scheme now?

The Tribunal sanctions it under section 232(3). It first orders meetings and checks that the circulation requirements of section 232(1) and (2) are met. Then it may sanction by order.

Can the Tribunal impose conditions when sanctioning?

Yes. Section 459(1) lets the Tribunal give sanction subject to conditions, limitations or restrictions. If a condition is breached, it may rescind or withdraw the sanction.

What must be filed after the sanction order?

A certified copy of the order must be filed with the Registrar within 30 days of receipt, under section 232(5). Until completion, a yearly certified compliance statement must also be filed under section 232(7).