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

Mehta Steels Ltd's creditor, Dalal Traders, filed a winding up petition on 10 March. The Tribunal, satisfied that a prima facie case exists, orders the company on 20 March to file objections with a statement of affairs. The company files nothing, even after the extra period the Tribunal allowed, and the winding up order is later made. Which statement is correct?

The company forfeits its right to oppose the petition, and the directors and officers found responsible are liable to punishment under section 274(4). That means imprisonment up to six months, or a fine of at least twenty-five thousand and up to five lakh rupees, or both.

  1. AThe company forfeits its right to oppose the petition, and responsible directors and officers are punishable under section 274(4)Correct
  2. BThe company may still oppose the petition, but only through the Registrar
  3. CThe company loses the right to oppose, but no officer faces any penalty
  4. DThe Tribunal must dismiss the petition for the creditor's failure to deposit security for costs

Explanation

Section 274(2) says a company failing to file the statement of affairs forfeits the right to oppose the petition, and responsible directors and officers are liable to punishment under sub-section (4), namely imprisonment up to six months or fine of Rs 25,000 to Rs 5 lakh, or both. The option denying penalty ignores this.

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