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CS Professional · Insolvency and Bankruptcy - Law and Practice · Winding-Up by Tribunal

Sagar Textiles Ltd passed a special resolution for voluntary winding up. Two weeks later the Central Government ordered an investigation into its affairs under section 210. The liquidator argues the investigation must stop because the company is in liquidation. What is the legal position under section 226?

The investigation continues. Section 226 provides that an investigation may be initiated, and no investigation shall be stopped or suspended, merely because the company has passed a special resolution for voluntary winding up. The liquidator cannot halt it.

  1. AThe investigation may be initiated and cannot be stopped or suspended merely because of the voluntary winding up resolutionCorrect
  2. BThe investigation must be suspended until the voluntary liquidation is completed
  3. CThe investigation can continue only with the permission of the liquidator
  4. DThe investigation lapses once the special resolution is registered

Explanation

Section 226 says an investigation may be initiated notwithstanding, and shall not be stopped or suspended by reason only of, a special resolution for voluntary winding up. The liquidator's argument therefore fails. Suspension or lapse has no basis in the section.

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