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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part IV)

Under a transfer arrangement, Aarav Insurance Ltd. transferred its business to Bharat Assurance Ltd., and Aarav or its creditors have claims against Bharat. Bharat is now being wound up, and Aarav is not yet in winding up. What must the Tribunal be satisfied of before directing Aarav to be wound up with Bharat?

The Tribunal must, after hearing the company's objections, be of opinion that Aarav is secondary to Bharat and that winding it up in conjunction with Bharat is just and equitable. Bharat's winding up alone does not suffice for a secondary company not already in winding up, under section 57(4).

  1. AAarav is secondary to Bharat and winding it up in conjunction is just and equitable, after hearing its objectionsCorrect
  2. BOnly that Bharat is being wound up
  3. COnly that a creditor of Bharat has applied
  4. DThat the Central Government has issued a reciprocal notification

Explanation

Section 57(4) says that where the alleged secondary company is not in winding up at the same time, the Tribunal shall not direct it to be wound up unless, after hearing its objections, it is of opinion that the company is secondary and that winding up in conjunction is just and equitable. Bharat's winding up and a creditor's application alone are not enough.

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