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

Tara Textiles Ltd is being wound up by the Tribunal, and a winding up order has been passed. Before the order, Kapoor Traders had filed a recovery suit against the company in a civil court, and the suit is still pending. What is the legal position of that suit?

The pending suit cannot proceed without the Tribunal's leave. After a winding up order, section 279(1) bars continuing any suit or legal proceeding against the company except with the Tribunal's permission and on the terms it imposes. The suit is stayed, not abated.

  1. AIt abates automatically on the date of the winding up order
  2. BIt may continue only with the leave of the Tribunal and on such terms as the Tribunal may imposeCorrect
  3. CIt continues as before because the suit was filed before the order
  4. DIt is transferred automatically to the Official Liquidator, who must defend it

Explanation

Under section 279(1), once a winding up order is passed, no suit or legal proceeding pending against the company can be proceeded with except with the Tribunal's leave and on its terms. The suit does not abate, so the first option is wrong. Pre-order filing gives no exemption, so the third option is wrong.

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