Corporate Restructuring, Valuation and Insolvency · Winding-up by Tribunal under the Companies Act, 2013

Grounds for Winding Up by Tribunal under Section 271

Updated 11 October 2026 · Fact-checked

Section 271 of the Companies Act, 2013 lists five grounds on which the Tribunal may wind up a company on a petition under section 272: special resolution, acts against State interests, fraud, five years of default in filing financial statements or annual returns, and the just and equitable ground. In an answer, match the facts to one ground.

Understand Grounds for Winding Up by Tribunal

Winding up ends a company's life. When the Tribunal orders it, the company's assets are sold, debts are paid and the company is then dissolved. The Tribunal acts only on a petition. Section 271 says when it may act. Section 272 says who may file.

The word in section 271 is may. Even if a ground exists, the Tribunal has discretion. It can dismiss the petition, make interim orders, appoint a provisional liquidator or order winding up (section 273).

The section 271 grounds are five:

(a) Special resolution: the company itself resolves by special resolution to be wound up by the Tribunal.
(b) Against State interests: the company has acted against the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality.
(c) Fraud: on an application by the Registrar or a person authorised by the Central Government, the Tribunal is of the opinion that affairs were conducted fraudulently, or the company was formed for a fraudulent and unlawful purpose, or those in formation or management were guilty of fraud, misfeasance or misconduct, and winding up is proper.
(d) Default in filing: the company has defaulted in filing financial statements or annual returns with the Registrar for the immediately preceding five consecutive financial years.
(e) Just and equitable: the Tribunal is of the opinion that it is just and equitable to wind up the company.

Inability to pay debts is not a separate clause in section 271 of the Companies Act, 2013. Insolvency of corporate debtors is dealt with under the Insolvency and Bankruptcy Code, 2016. Inability to pay debts does appear as a ground for unregistered companies under section 375. Keep these two apart in your answer.

The just and equitable ground is a safety net. Section 273(2) lets the Tribunal refuse the order if another remedy is available to the petitioners and they act unreasonably in seeking winding up instead. Section 242 supports this. If winding up would unfairly prejudice the members, but the facts would otherwise justify a just and equitable order, the Tribunal may make other orders to end the oppression.

Key rules to remember

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.

How to solve Grounds for Winding Up by Tribunal questions

Use this method for any fact-based question on grounds for winding up by Tribunal.

1Identify the type of company: registered under the Companies Act, 2013, or an unregistered company. This decides between section 271 and section 375.
2Read the facts and pick out the key conduct: a resolution, fraud, filing default, harm to State interests, or deadlock and loss of trust.
3Match the conduct to one clause of section 271, and name the clause.
4Check the conditions of that clause: special resolution passed, five consecutive years, who applied for fraud, and so on.
5Note that the Tribunal has discretion under section 273. For just and equitable, check whether another remedy exists (section 273(2)) and the section 242 route.
6Conclude clearly: the Tribunal may wind up, may refuse, or may pass other orders. State the likely outcome and the reason.

Quickest way: Five-clause scan

When to use it: When time is short and the question asks whether a ground exists.

Scan the facts for a keyword: resolution, sovereignty or morality, fraud, five years not filed, or just and equitable.
Write the clause letter and its words in one line.
Test the one condition that is easy to miss: five consecutive years, Registrar as applicant, or special resolution.
Add one line on Tribunal discretion and the 90-day order timeline.
Close with a one-line conclusion.

Common mistakes in Grounds for Winding Up by Tribunal

Listing inability to pay debts as a ground in section 271 for a company registered under the Companies Act, 2013.
Older law and textbooks had it as a ground, and section 375 for unregistered companies lists it.
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.
Students remember default but not the period.
Fix: State that the default must be in filing financial statements or annual returns for the immediately preceding five consecutive financial years.
Letting a creditor or member invoke the fraud ground by themselves.
Students assume anyone with a grievance can use any clause.
Fix: Clause (c) needs an application by the Registrar or a person authorised by the Central Government.
Writing that the Tribunal must wind up once a ground is proved.
Students ignore the word may.
Fix: Say the Tribunal has discretion and can dismiss, make interim orders or pass other orders under section 273.
Stating that the Tribunal refuses winding up because the company has no assets.
Students assume a worthless company is not worth winding up.
Fix: Quote the proviso: the Tribunal shall not refuse only because assets are mortgaged to the full value or because the company has no assets.

Worked examples

Example 1

Meridian Traders Private Limited, a registered company, has not filed its financial statements or annual returns with the Registrar for the last five consecutive financial years. A shareholder asks you whether the Tribunal can wind it up on this ground. Advise.

Show the solution

The company is registered under the Companies Act, 2013, so section 271 applies.
Section 271(d) allows winding up if the company defaulted in filing financial statements or annual returns for the immediately preceding five consecutive financial years.
The facts show default in both documents for five consecutive years, so the condition is met.
The Tribunal acts on a petition under section 272 and has discretion under section 273. It may dismiss, make interim orders, appoint a provisional liquidator or order winding up, and must decide within ninety days of presentation of the petition.

Answer: Yes. Section 271(d) is satisfied, so the Tribunal may wind up the company on a petition under section 272. The order is discretionary, not automatic.

Example 2

Three directors of Kaveri Foods Limited hold the majority and have shut out the minority from management. The minority members want winding up on the just and equitable ground. The Tribunal finds the facts would justify it, but that winding up would unfairly prejudice the minority. What can the Tribunal do?

Show the solution

The ground is section 271(e): just and equitable.
Section 273(2) lets the Tribunal refuse winding up if another remedy exists and the petitioners act unreasonably in seeking it.
Section 242(1) applies where affairs are conducted oppressively, and winding up would unfairly prejudice the members, though the facts would otherwise justify it. The Tribunal may then make such order as it thinks fit to end the matters complained of.
Under section 242(2) the order may regulate future conduct of affairs, provide for purchase of shares by other members or by the company, remove directors, or set aside agreements, among other things.
A certified copy of the order must be filed with the Registrar within thirty days.

Answer: The Tribunal need not wind up the company. It may instead pass an order under section 242, such as a share buyout, regulation of future conduct or removal of directors, and the company must file the order with the Registrar within thirty days.

Exam tips

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.
Check whether the company is unregistered. If so, use section 375 and its grounds.
Link grounds to the next topics: who can file, and the consequences of a winding-up order.

Practice questions from Winding-up by Tribunal under the Companies Act, 2013

Grounds for Winding Up by Tribunal in other exams

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

Grounds for Winding Up by Tribunal: frequently asked questions

How many grounds are there in section 271 of the Companies Act, 2013?

There are five: special resolution, acts against State interests, fraud, five years of filing default, and the just and equitable ground. They are in clauses (a) to (e). The Tribunal acts on a petition under section 272.

Is inability to pay debts a ground for winding up by Tribunal?

Not in section 271 for registered companies. It is a ground for unregistered companies under section 375. For companies, insolvency is dealt with under the Insolvency and Bankruptcy Code, 2016.

What does just and equitable mean in winding up?

The Act does not define it. It lets the Tribunal wind up a company when it is of the opinion that this is fair in the circumstances. The Tribunal may refuse if another remedy is available and the petitioners act unreasonably.

Must the Tribunal wind up the company if a ground is proved?

No. Section 273 gives it discretion to dismiss, make interim orders, appoint a provisional liquidator or order winding up. It must pass an order within ninety days of presentation of the petition.