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Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

Scheme of Revival and Rehabilitation under Section 261 of the Companies Act, 2013

Updated 11 October 2026 · Fact-checked

Section 261 of the Companies Act, 2013 dealt with the scheme of revival and rehabilitation of a sick company. It was omitted with effect from 15 November 2016, along with section 254. Today, revival of a distressed company runs through the IBC, schemes under sections 230-232, and appeals under section 421.

Understand Scheme of Revival and Rehabilitation (Section 261)

A sick company is one that cannot pay its debts or is making heavy losses. The original scheme of the Companies Act, 2013 tried to rescue such a company through a formal revival route. Sections 254 to 261 were meant for this. They covered an application for revival and rehabilitation (section 254) and the scheme itself (section 261).

You must know one fact first. The official text shows that section 261 (Scheme of revival and rehabilitation) and section 254 (Application for revival and rehabilitation) are both omitted with effect from 15-11-2016. They are not in force. So you cannot answer a question by applying them as live law.

In an exam, the safe approach is to state that the sections stand omitted, and then explain how a sick company is revived now. A company can propose a compromise or arrangement under section 230. A merger or demerger is done under section 232. Debt resolution can go through the Insolvency and Bankruptcy Code, 2016 (a resolution plan).

The topic also covers appeals against Tribunal orders. Here the live provision is section 421. Any person aggrieved by an order of the Tribunal may appeal to the Appellate Tribunal. This applies to orders on schemes too. Section 420 gives the Tribunal power to pass orders after a reasonable hearing and to correct a mistake apparent from the record.

Key rules to remember

Status of section 261
Section 261 (scheme of revival and rehabilitation) = omitted w.e.f. 15-11-2016
Section 254 is omitted from the same date. Do not apply either as current law.
Who may appeal (section 421(1))
Any person aggrieved by a Tribunal order → appeal to the Appellate Tribunal
The appellant must be aggrieved by the order.
No appeal on consent orders (section 421(2))
Order made with the consent of parties → no appeal
A common trap in case questions.
Time limit for appeal (section 421(3))
45 days from the date a copy of the order is made available + condonation up to a further 45 days
Condonation only if the Appellate Tribunal is satisfied of sufficient cause for the delay.
Powers of Appellate Tribunal (section 421(4))
Confirm, modify or set aside the order appealed against
Only after a reasonable opportunity of being heard to the parties.
Rectification by Tribunal (section 420(2))
Amend within 2 years from the date of order for a mistake apparent from the record
Not allowed if an appeal has been preferred against that order.

How to solve Scheme of Revival and Rehabilitation (Section 261) questions

Use this method for any question on revival of a sick company or appeal against a Tribunal order.

  1. 1Read the facts and find what is asked: revival scheme under section 261, or appeal against an order.
  2. 2If section 261 or 254 is cited, state at once that both are omitted w.e.f. 15-11-2016.
  3. 3Name the route now available for revival: a section 230 compromise or arrangement, a section 232 scheme, or an IBC resolution plan, as the facts suit.
  4. 4If an order of the Tribunal is involved, check whether it was passed with the consent of parties. If yes, no appeal lies under section 421(2).
  5. 5Count the days from the date a copy of the order was made available. Apply 45 days, then the further 45 days only if sufficient cause is shown.
  6. 6State the Appellate Tribunal's powers: confirm, modify or set aside, after hearing the parties.
  7. 7Write a clear conclusion on the facts and add a practical point, such as filing the appeal in the prescribed form with fees.

Quickest way: Omitted-or-live check

When to use it: Use when the question names section 261 or asks whether an appeal is possible and in time.

  1. Write: sections 254 and 261 are omitted from 15-11-2016.
  2. Switch to the live route: sections 230-232 or the IBC.
  3. For an appeal, test three things: aggrieved person, not a consent order, within 45 days (plus up to 45 with cause).
  4. Conclude in one line with the section 421 reference.

Common mistakes in Scheme of Revival and Rehabilitation (Section 261)

  • Explaining section 261 as if it is in force and listing steps of a revival scheme.

    Older books and notes still describe the scheme.

    Fix: Start with the omission w.e.f. 15-11-2016 and then explain the current routes.

  • Saying an appeal is always possible against a Tribunal order.

    Students remember only section 421(1).

    Fix: Also recall section 421(2): no appeal against an order made with the consent of parties.

  • Giving the appeal period as 30 or 60 days.

    Mixing it with other statutes.

    Fix: Remember 45 days, extendable by up to a further 45 days for sufficient cause.

  • Treating the extra 45 days as automatic.

    Students read the proviso loosely.

    Fix: The Appellate Tribunal must be satisfied that sufficient cause prevented timely filing.

  • Saying the Tribunal can rectify an order at any time.

    Confusing section 420(2) with a general review power.

    Fix: Rectification is for a mistake apparent from the record, within two years, and not once an appeal has been filed.

Worked examples

Example 1

Sunrise Textiles Ltd, a sick company, wants to file a scheme of revival and rehabilitation under section 261 of the Companies Act, 2013. Advise the board.

Show the solution
  1. Check the status of the provision. Section 261 and section 254 are omitted w.e.f. 15-11-2016.
  2. So the company cannot file a scheme under section 261.
  3. Suggest alternatives. If it wants to settle with creditors or members, it can propose a compromise or arrangement under section 230.
  4. If revival is by merger with another company, a scheme under section 232 is needed, with the Tribunal's sanction.
  5. If the debt default is serious, resolution through a plan under the Insolvency and Bankruptcy Code, 2016 is another route.

Answer: Section 261 is not available as it stands omitted from 15-11-2016. The board should use section 230 or 232, or the IBC, depending on the plan.

Example 2

The Tribunal sanctioned a scheme on 1 March. A dissenting shareholder, Mr Rao, received a copy of the order on 10 March and wishes to appeal on 1 June, giving illness as the reason. The order was not passed by consent. Can he appeal?

Show the solution
  1. Mr Rao is a person aggrieved by an order of the Tribunal, so section 421(1) allows an appeal.
  2. The order was not by consent, so section 421(2) does not bar it.
  3. The 45 days run from 10 March, when the copy was made available. They end on 24 April.
  4. Delay beyond 45 days can be condoned for a further period not exceeding 45 days, that is up to 8 June.
  5. 1 June falls within this extended window, so the Appellate Tribunal may entertain it if it is satisfied that illness was a sufficient cause.
  6. The Appellate Tribunal must hear the parties and may confirm, modify or set aside the order.

Answer: Yes. The appeal is late but within the further 45 days. It will be entertained only if the Appellate Tribunal accepts illness as sufficient cause.

Exam tips

  • Open any section 261 question by stating that it is omitted w.e.f. 15-11-2016. This shows you know the current law.
  • Learn section 421 sub-sections (1) to (4) by number and content. Case questions often test the 45-day limit and the consent bar.
  • Do the date count in the answer. Write the start date, the end of 45 days and the end of the extra 45 days.
  • Link your answer to the live route: section 230, 232 or the IBC, and finish with a firm conclusion.

Practice questions from Regulatory Approvals of Scheme

Scheme of Revival and Rehabilitation (Section 261): frequently asked questions

Is section 261 of the Companies Act, 2013 still in force?

No. Section 261 (scheme of revival and rehabilitation) is omitted with effect from 15 November 2016. Section 254 is omitted from the same date.

What is the time limit for appeal against a Tribunal order?

Under section 421(3), the appeal must be filed within 45 days from the date a copy of the order is made available to the aggrieved person. The Appellate Tribunal may allow a further period not exceeding 45 days if sufficient cause is shown.

Can I appeal against an order passed by consent?

No. Section 421(2) says no appeal lies to the Appellate Tribunal from an order made by the Tribunal with the consent of parties.

How is a sick company revived now?

Options include a compromise or arrangement under section 230, a merger or demerger scheme under section 232, or a resolution plan under the Insolvency and Bankruptcy Code, 2016. The route depends on the facts.