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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

Sunrise Textiles Ltd, a sick industrial company in Coimbatore, wants to file an application before the Tribunal under Section 254 of the Companies Act, 2013 so that a scheme of revival and rehabilitation can be sanctioned under Section 261. As per the official text of the Act, what is the legal position?

The provisions on revival and rehabilitation applications and schemes, Sections 254 and 261, stand omitted from the Companies Act, 2013 with effect from 15 November 2016. A sick company therefore cannot invoke them, whatever its net worth, ownership or creditor consent.

  1. ASection 261 operates only for companies with net worth below zero
  2. BSections 254 and 261 have been omitted w.e.f. 15-11-2016, so the route is not available under the ActCorrect
  3. CSection 261 applies only to public sector companies
  4. DSection 261 is available but only with the written consent of all secured creditors

Explanation

The official text records that Section 261 (scheme of revival and rehabilitation) and Section 254 (application for revival and rehabilitation) are omitted with effect from 15-11-2016. Hence no application can be filed under them. The other options assume the provision is still in force with conditions.

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