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

Tribunal passed a winding up order against Kaveri Textiles Ltd on 3 March. A supplier had filed a recovery suit against the company in a civil court in 2023, and it is still pending. The supplier wants to continue the suit. What is the legal position under the Companies Act, 2013?

After a winding up order, a pending suit against the company cannot be proceeded with unless the Tribunal grants leave. The Tribunal may attach terms. The suit is not automatically saved because it was filed earlier, and it is not abated or dependent on shareholders.

  1. AThe suit continues automatically because it was filed before the winding up order
  2. BThe suit cannot proceed unless the Tribunal grants leave, and it may impose termsCorrect
  3. CThe suit stands abated permanently and cannot be revived
  4. DThe suit may proceed only if the company's shareholders pass a special resolution

Explanation

Once a winding up order is passed or a provisional liquidator is appointed, a pending suit by or against the company can proceed only with the leave of the Tribunal, subject to terms the Tribunal imposes. Filing before the order gives no automatic exemption, so the first option is wrong.

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