Provisions applicable to every mode of winding up

PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP

Companies Act – CHAPTER V

Proof and ranking of claims

528.Debts of all descriptions to be admitted to proof.

In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency, and all claims againstthe company,present or future, certainor contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far aspossible, ofthe valueofsuch debts or claims asmaybesubjectto any contingency, or may sound only in damages, or for someother reason may not bear a certain value.

529.Application of insolvency rules in winding up of insolvent companies.

(1)In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to –

(a)debts provable;

(b)the valuation of annuities and futureandcontingent liabilities; and

(c)the respectiverights of securedand unsecured creditors; as are in force for the time being under thelaw of insolvency with respect to the estates of persons adjudged insolvent:

1[Provided that the security of every secured creditor shall be deemedto be subject to a pari passu charge in favour of theworkmentothe extent of the workmen’s portion therein, and, where asecured creditor, instead of relinquishing his security and proving hisdebt, opts to realise his security –

(a)the liquidatorshallbe entitled to represent the workmenand enforce such charge;

(b)any amount realised by the liquidator by way of enforcementof such charge shall be applied ratably forthe discharge of workmen’s dues; and

(c)so muchof the debt due to such creditor as couldnotbe realised by him by virtueoftheforegoing provisionsofthis proviso or the amount oftheworkmen’s portion in his security, whichever is less, shall rankpari passuwiththe workmen’s dues for the purposesofsection 529A.]

(2)All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section,

2[Providedthat if a secured creditor instead of relinquishing hissecurityandprovingfor hisdebtproceedstorealisehis security,he shall be liable to 3[pay his portion of the expenses] incurred by the liquidator(including a provisional liquidator, if any) for the preservation of the security before its realizationbythe secured creditor.]

1[Explanation.-For the purposes of this proviso, the portion of expenses incurred by the liquidator for the preservation of a security which the secured creditor shall be liable to pay shall be the whole of the expenses less amount which bears to such expenses the same proportion as the workmen’s portion in relation to the security bears to the value of the security.]

1[(3)For the purposes of this section, section 529A and section 530 –

(a)”workmen”,inrelationtoacompany,meansthe employees of the company, being workmen within the meaning of the Industrial Disputes Act, 1947(14 of 1947);

(b)”workmen’s dues”,in relation to a company, means the aggregateof the following sums due from the company toits workmen, namely –

(i)allwages or salary including wages payablefor timeor piece work and salary earned wholly or inpart by way of commission of any workman, in respect of servicesrendered to the company andanycompensation payableto any workman under any of theprovisions of the Industrial Disputes Act, 1947 (14 of 1947);

(ii)all accrued holiday remuneration becomingpayable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of the winding uporder or resolution;

(iii)unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such contract with insurers as is mentioned in section 14 the Workmen’s Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect ofthedeath or disablement of any workman of the company;

(iv)all sums due to any workman from a providentfund, apension fund, a gratuity fund or any otherfundfor the welfare of the workmen, maintained by the company;

(c)”workmen’s portion”, in relation to the security of any securedcreditor of a company, means the amount whichbears to thevalueof the security the sameproportionasthe amount of the workmen’s dues bears to the aggregate of –

(i)the amount of workmen’s dues; and

(ii)the amounts of thedebtsduetothe secured creditors.

Illustration

The value of the security of a secured creditor of a company is Rs. 1,00,000.The total amount of the workmen’s dues is Rs. 1,00,000 The amount of thedebts duefromthe company to its secured creditors is Rs. 3,00,000.The aggregate of the amount of workmen’s dues and of the amounts of debts due to secured creditors is Rs. 4,00,000. The workmen’s portion of the security is, therefore, one-fourth of the value of the security, that is Rs. 25,000.]

Overriding preferential payment

529A.Overriding preferential payment.

Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force in the winding up of a company –

(a)workmen’s dues; and

(b)debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.

(2)The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.]

530.Preferential payments.

(1)In a winding up, 5[subject to the provisions of section 529A, there shall be paid] in priority to all other debts –

(a)all revenues, taxes, cesses and ratesduefromthe companyto the Central or a State Government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payablewithinthe twelve months next before that date;

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1.Ins.by Act 35 of 1985, s.4.

2.Ins. by Act 65 of 1960, s. 183.

3.Subs. by s.4, ibid.

4.Ins. by s.5, ibid.

5.Subs. by s.6, ibid.

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(b)all wages or salary (including wages payable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date 1* ** subject to the limit specified in sub-section (2);

(c)all accrued holiday remuneration becomingpayable to any employee, or in the case of his death to any other person in his right, on the termination of his employment before or by the effect of, the winding up order or resolution;

(d)unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due, in respect of contributions payable during the twelve months next beforetherelevant date,by the company as the employer of anypersons, under theEmployees’ State Insurance Act, 1948 ( 34 of1948.)or any other law for the time being in force;

(e)unless the company is being wound up voluntarily merely for the purposes of reconstruction or ofamalgamationwith anothercompany,orunlessthecompanyhas, at the commencement of the winding up, under such acontractwith insurers asismentioned in section 14oftheWorkmen’s Compensation Act, 1923, (8 of 1923.) rights capable ofbeing transferred to and vested in the workman, all amounts due in respectofany compensation or liability for compensation under the said Act in respect of the death or disablementof any employee of the company;

(f)all sums due to any employee from aprovidentfund, a pensionfund agratuity fund-or any otherfundfor the welfare of the employees, maintained by the company; and

(g)the expenses of any investigation held in pursuanceof section235or 237, in so far as they arepayablebythe company.

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1.Omitted by Act 35 of 1985, s.6.

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(2)The sum to which priority is to be given under clause (b) of sub-section (1), shall not, in the case of any one claimant, exceed one thousand rupees. 1*****

(3)Where any compensation under the Workmen’s Compensation Act, 1923(8of1923)is a weekly payment, theamountdueinrespect thereofshall, for the purposes of clause (e) of sub-section (1),be takento be the amount of the lump sum for which theweeklypayment could, if redeemable, be redeemed if the employer made anapplication for that purpose under the said Act.

(4)Where any payment has been made to any employee of a company –

(i)on account of wages or salary ; or

(ii)tohim,orin the case of his death,toanyother personinhisright, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in a winding up, have aright of priorityinrespect of the money so advanced and paid, up to the amountbywhich the sum in respect of which theemployeeorother personinhisright, would have been entitled to priority in the winding up has been diminished by reason of the paymenthavingbeen made.

(5)The foregoing debts shall –

(a)rank equallyamong themselves and bepaidinfull, unlesstheassets are insufficient to meet them, inwhich case they shall abate in equal proportions; and

(b)so far as the assets of the company available for payment of general creditors are insufficient to meetthem, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordinglyout of any property comprised in orsubjectto that charge.

(6)Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to meet them, and in the case of the debts to which priority is given by clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed.

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1.Omitted by Act 35 of 1985, s.6

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(7)In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof:

Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

(8)For the purposes of this section –

(a)any remuneration in respect of a period of holiday or ofabsence from work through sickness or othergoodcause shall be deemed to be wages in respect of services rendered to the company during that period;

(b)the expression “accrued holiday remuneration” includes, in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday 1* * *.

2[(bb)the expression “employee” does not include a workman;] and

(c)the expression “the relevant date” means –

(i)in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator, or ifnosuch appointment was made, the date of the winding up order, unless in either case the company had commenced tobe wound up voluntarily before that date; and

(ii)in any case where sub-clause (i) does notapply, the date of the passing of the resolution for the voluntarywinding up of the company.

(9)This section shall not apply in the case of a winding up where the date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913,(7 of 1913.) occurred before the commencement of this Act, and in such a case, the provisions relating to preferential payments whichwould have applied if this Act had notbeenpassed, shall be deemed to remain in full force.

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1.Omittedby Act 35 of 1985, s.6.

2.Ins. by s.6, ibid.

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Effect of winding up on antecedent and other transactions

531.Fraudulent preference.

(1)Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company beingwoundup, be deemed a fraudulent preference of its creditorsandbeinvalid accordingly:

Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months.

(2)For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual.

531A.Avoidance of voluntary transfer.

Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrance in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by or subject to the supervision of the Court or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator.

532.Transfer for benefit of all creditors to be void.

Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

533.Liabilities and rights of certain fraudulently preferred persons.

(1)Where. in the case of a company which is being wound up, anythingmade, taken or done after the commencement ofthis Act is invalidundersection531 as a fraudulent preference of a person interestedin property mortgaged or charged to secure the company’s debt, then(without prejudice to any rights or liabilities arising apart from this provision), the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken tobe personally liable as surety for thedebt,tothe extent of the mort –

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1.Ins. by Act 65 of 1960, s. 185.

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(2)The value of the said person’s interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the mortgage or charge for the company’s debt was then subject.

(3)On any application made to the Court with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Court shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party asin the case of a suit for the recovery of the sum paid.

This sub-section shall apply, with the necessary modifications, in relation to transactions other than the payment of money as it applies in relation to payments of money.

534.Effect of floating charge.

Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediatelypreceding the commencement of the winding up, shall, unless it is provedthatthe companyimmediately after the creation of the charge was solvent,be invalid,except to the amount of any cash paid to the company atthe time of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate offive percent. per annum or such other rate as may for the timebeingbe notifiedbythe Central Government in this behalfintheOfficial Gazette:

Providedthatin relation to a charge created morethan three monthsbefore the commencement of this Act, this section shall have effectwith the substitution, for references to twelve months of references to three months.

535.Disclaimer of onerous property in case of a company which is being wound up.

(1)Where any part of the property of a company which is being wound up consists of –

(a)land of any tenure,burdened with onerous covenants;

(b)shares or stock in companies;

(c)any other property which is unsaleable or is not readilysaleable, by reason of its binding the possessor thereof either to theperformance of any onerous act or to the payment of any sum of money; or

(d)unprofitable contracts;

the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in pursuance of the contract, may,with the leave of the Court andsubjecttothe provisionsofthis section, by writing signed by him,atanytime within twelve months after the commencement of the winding up orsuch extended period as may be allowed by the Court, disclaim the property:

Providedthat,whereany such property hasnotcometothe knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereofor such extended period as may be allowed by the Court.

(2)The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.

(3)The Court, before or on granting leave to disclaim, may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

(4)The liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of the application or such extended period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim; and in case the property is a contract, if the liquidator, after such an application as aforesaid, doesnotwithin thesaid period or extended period disclaim the contract, 1[heshall be deemed to have adopted it.

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1.Subs.by Act 65 of 1960, s. 186, for “thecompanyshallbe deemed to have adopted it”.

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(5)The Court may, on the application of any person who is, as againsttheliquidator, entitled to the benefit orsubjecttothe burden of a contract made with the company, make an orderrescinding the contracton such terms as to payment by or toeitherparty of damagesfor the non-performance of the contract, or otherwise asthe Courtthinksjust ; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

(6)The Court may, on an application by any personwhoeither claims any interest in any disclaimed property or is under any liability not discharged by this Act in respect of any disclaimed property, and after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery of thepropertyto, anypersonentitledthereto or to whom it may seemjustthatthe property should be delivered by way of compensation for such liability asaforesaid,or a trustee for him, and on such terms asthe Court thinks just; and on any such vesting order being made, theproperty comprisedtherein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose:

Providedthat, where the property disclaimed is of a lease-hold nature,the Court shall not make a vesting order in favour of any personclaimingunderthe company, whether as under-lessee or as mortgageeor holder of a charge by way of demise, except upon the terms of making that person –

(a)subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or

(b)if the Courtthinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date; and in either event (if the case so requires) as if the lease had comprisedonlythe property comprised in the vesting order; andany mortgagee orunder-lessee declining to accept a vestingorder upon such terms shall be excluded from all interest in andsecurityupon theproperty, and, if there is no person claiming underthe company who is willing to accept an order upon such terms, the Court shall have powerto vest the estate and interest of thecompanyinthe propertyinany person liable, either personally or in a representative character, and either alone or jointly with the company, to perform the lessee’s covenants in the lease, freed and discharged from allestates, encumbrances and interests createdthereinbythe company.

(7)Anyperson injured by the operation of adisclaimerunder thissection shall be deemed to be a creditor of the companyto the amountof thecompensation or damages payableinrespectofthe injury, and may accordingly prove the amount as a debt in thewinding up.

536.Avoidance of transfers, etc., after commencement of winding up.

(1)In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void.

(2)In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void.

537.Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court.

(1)Where any company is being wound up by or subject to the supervision of the Court –

(a)any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or

(b)any sale held, without leave of the Court, of any of theproperties or effects of the company after suchcommencement; shall be void.

1[(2)Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government.]

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Offences antecedent to or in course of winding up

538.Offences by officers of companies in liquidation.

(1)If any person, being a past or present officer of a company, which, at the time of the commission of the alleged offence, is being wound up, whether by or subject to the supervision of the Court or voluntarily, or which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up –

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1.Subs. by Act 65 of 1960, s. 187, for sub-section (2).

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(a)does not, to the best of his knowledge and belief, fully and truly discover to the liquidator all the property, movable and immovable, of the company, and how and to whom and for what consideration and when the company disposed of any part thereof, except such part as has been disposed of in the ordinary course of the business of the company;

(b)does notdeliver up to theliquidator, or as he directs, all such part of the movable and immovableproperty of the company as is in his custody or under his control, and which he is required by law to deliver up;

(c)does not deliver upto theliquidator,orashe directs,all such books and papers of the company as are in his custody or under his control and which he is requiredby law to deliver up;

(d)within the twelve months next before thecommencement ofthewinding up or at any time thereafter,conceals any partoftheproperty of the company to the value of one hundred rupees or upwards, or conceals any debt due to or from the company;

(e)within the twelve months next before thecommencement ofthewinding up or at any timethereafter, fraudulently removes any part of the property of the company to the value of one hundred rupees or upwards;

(f)makes any material omission in any statement relating to the affairs of the company;

(g)knowing or believing that a false debt has beenproved by any person under the winding up, fails for a period of one month to inform the liquidator thereof;

(h)after the commencement of the winding up, prevents the production of any book or paper affecting or relating tothe property or affairs of the company;

(i)within the twelve months next before the commencement of thewindingup or atanytimethereafter,conceals, destroys,mutilatesor falsifies, or is privy to the concealment, destruction, mutilation or falsification of,any book or paperaffecting or relating to, thepropertyor affairs of the company;

(j)withinthe twelve months next before the commencement ofthewinding up or at any time thereaftermakes,oris privy to the making of, any false entry in any book orpaper affectingor relating to, the property oraffairsofthe company;

(k)within the twelve months next before the commencement ofthewinding up or at any timethereafter, fraudulently parts with, alters or makes any omission in, or is privy to the fraudulentpartingwith, alteringormakingofany omissionin, any book or paper affecting or relating tothe property or affairs of the company;

(l)after the commencement of the winding up or at any meetingofthe creditors of the company within the twelve months next before the commencement of the windingup, attempts to accountfor any part of thepropertyofthe company by fictitious losses or expenses;

(m)within the twelve months next before thecommencement ofthewinding up or at any time thereafter, by any false representation or other fraud, obtains on credit, for or on behalfof the company, any property which thecompanydoes not subsequently pay for;

(n)within the twelve months next before thecommencement of the winding up or at any time thereafter, under thefalse pretencethatthecompany iscarryingonitsbusiness, obtainsoncredit,for or on behalf ofthecompany, any property which the company does not subsequently pay for;

(o)within the twelve months next before thecommencement ofthe winding up or at any time thereafter, pawns pledges or disposes of any property of the company whichhasbeen obtained on credit and has not been paid for unless such pawning pledging or disposing is in the ordinary courseof the business of the company; or

(p)is guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them, to an agreement with reference to the affairs of the company or to the winding up; he shall be punishable in the case of any of the offences mentioned in clauses (m), (n) and (o), with imprisonment for a term which may extend to five years, or with fine, or with both, and, in the case of any other offence, with imprisonment for a term which mayextendto two years, or with fine, or with both:

Provided that it shall be a good defence –

(i)to a charge under any of the clauses, (b), (c),(d), (f), (n) and (o), if the accused proves that he had no intent to defraud; and

(ii)to a charge under any of the clauses, (a), (h), (i) and if he proves that he had no intent to conceal the truestate of affairs of the company or to defeat the law.

(2)Where any person pawns, pledges or disposes of any property in circumstances which amount to an offence under clause (o) of sub-section (1), every person who takes in pawn or pledge or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances as aforesaid, shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.

(3)For the purposes of this section, the expression “officer” shall include any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

Penalty for falsification of books

539.Penalty for falsification of books.

If with intent to defraud or deceive any person, any officer or contributory of a company which is being wound up –

(a)destroys, mutilates, alters, falsifies or secretes, or is privy to the destruction, mutilation, alteration, falsification or secreting of, any books,papers or securities; or

(b)makes, or is privy to the making of,anyfalse or fraudulent entry in any register, book of account or document belonging to the company; heshall be punishable with imprisonment for a term which mayextend to seven years, and shall also be liable to fine.

540.Penalty for frauds by officers.

If any person, being at the time of the commission of the alleged offence an officer of acompany whichissubsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up –

(a)has, by false pretences or by means of any other fraud, induced any person to give credit to the company; or

(b)withintent to defraud creditors of thecompany, has made or caused to be made any gift or transfer of or charge on orhas caused or connived at the levying ofanyexecution against, the property of the company; or

(c)with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgment or order for payment of money obtained against the company, or within two months before that date; he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

541.Liability where proper accounts not kept.

(1)Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of thecompanywas carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year.

(2)For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept –

(a)such books or accounts as arenecessary to exhibitand explainthetransactions and financial position of the businessof the company, including books containingentries made from day to day in sufficientdetailofallcash received and all cash paid; and

(b)where the business of the company has involved dealings ingoods, statements of the annual stock takings and(except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing thegoods and the buyers andsellers thereof in sufficient detailtoenable those goods and those buyers and sellers to be identified.

542.Liability for fraudulent conduct of business.

(1)If in the course of the winding up of a company, it appears that any business of the company has been carried on, with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Court on the application of the Official Liquidator, orthe liquidator or any creditor or contributory of the company, may, if it thinks it proper so to do, declarethatany persons who were knowingly parties to the carrying on of thebusiness in the manner aforesaid shall be personally responsible, withoutany limitation of liability, for all or anyofthedebts orother liabilities of the company as the Court may direct.

On the hearing of an application under this sub-section, the Official Liquidator or the liquidator, as the case may be, may himself give evidence or call witnesses.

(2)(a)Where the Court makes any such declaration, it maygive such further directions as it thinks proper for the purpose ofgiving effect to that declaration.

(b)In particular, the Court may make provision for making the liabilityofany such person under the declaration a chargeonany debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any personclaiming as assignee from or through the person liable or any person acting on his behalf.

(c)The Court may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section.

(d)For the purpose of this sub-section, the expression “assignee”includesany person to whom or in whosefavour,bythe directions ofthe person liable, the debt, obligation,mortgageor charge was created, issued or transferred or the interest was created, butdoesnotinclude an assignee forvaluableconsideration(not including consideration by way of marriage) given in goodfaithand withoutnoticeofany of the matters on thegroundofwhichthe declaration is made.

(3)Whereanybusiness of a company is carriedonwithsuch intent orfor such purpose as is mentionedinsub-section (1), every personwhowas knowingly a party to the carrying on of the business in the manneraforesaid,shallbe punishable with imprisonmentfor a term which may extend to two years, or withfine which may extend to five thousand rupees, or with both.

(4)This section shall apply, notwithstanding thattheperson concerned maybe criminally liable in respect of the matters onthe ground of which the declaration is to be made.

Power of Court to assess damages against delinquent directors, etc.

543.Power of Court to assess damages against delinquent directors, etc.

(1)If in the course of winding up a company, it of the company, or any past or present director, managing agent, secretaries and company –

(a)has misapplied, or retained, or become liable or accountable for, any money or property of the company; or

(b)has been guilty of any misfeasance or breach oftrust in relation to the company; the Court may, on the application of the Official Liquidator, of the liquidator, or of any creditor or contributory, made within the time specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries andtreasurers, manager, liquidator or officer aforesaid, and compel him to repay or restorethe money or property or any part thereof respectively,with interest at such rate as the Court thinks just, or to contributesuch sum to the assets of the company by way of compensation in respectof themisapplication, retainer, misfeasance or breach of trust, asthe Court thinks just.

(2)An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer,. misfeasance or breach of trust, as the case maybe, whichever is longer.

(3)This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.

544.Liability under sections 542 and 543 to extend to partners or directors in firm or company.

Where a declaration under section 542 or an order under section 543 is or may be made in respect of a firm or body corporate, the Court shall also have power to make a declaration under section 542, or pass an order under section 543, as the case may be, in respect of any person who was at the relevant time a partner in that firm or a director of that body corporate.

545.Prosecution of delinquent officers and members of company.

(1)If it appears to the Court in the course of a winding up by, or subject to the supervision of, the Court, that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, the Court may, either on the application of any person interested in the winding up or of its own motion, direct the liquidator either himself to prosecute the offender or to refer the matter to the Registrar.

(2)If it appears to the liquidator in the course of a voluntary windingupthat any past or present officer, or any member,ofthe company has been guilty of any offence in relation to the company, he shall forthwith report the matter totheRegistrarandshall furnishtohim such information and give to him such access to and facilitiesfor inspecting and taking copies of any books andpapers, beinginformation or books and papers in the possession or underthe control of the liquidator and relating to the matter in question, as the Registrar may require.

(3)Where any report is made under sub-section (2) to the Registrar, he may, if he thinks fit, refer the matter to the Central Government for further inquiry.

The Central Government shall thereupon investigate the matter and may, ifitthinks it expedient, apply to theCourtforanorder conferring on any person designated by the Central Government forthe purpose,withrespect to the company concerned, all suchpowersof investigatingthe affairs of the company as are provided by this Act in the case of a winding up by the Court.

(4)If on any report to the Registrar under sub-section (2), it appears to him that the case is not one in which proceedings ought to be taken by him, he shall inform the liquidator accordingly, and thereupon, subject to the previous sanction of the Court, the liquidator may himself take proceedings against the offender.

(5)Ifitappears to the Court in the courseofavoluntary windingupthat any past or present officer, or any member,ofthe company has been guilty as aforesaid, and that no report withrespect tothe matter has been made by the liquidator to the Registrarunder sub-section (2),theCourt may, on theapplicationofanyperson interestedinthewindingup or ofitsownmotion,directthe liquidatortomakesuchareport, andonareportbeingmade accordingly,theprovisionsof this section shallhaveeffectas though the report had been made in pursuance of the provisions of sub- section (2).

(6)If,whereanymatterisreportedorreferredtothe Registrarunderthis section, he considers that the case isonein which a prosecution ought to be instituted, he shall report the matter to the Central Government; and that Government may, after takingsuch legaladviceasit thinks fit, direct theRegistrartoinstitute proceedings:

Provided that no report shall be made by the Registrar under this sub-section without first giving the accused person an opportunity of makingastatement in writing to the Registrar andofbeingheard thereon.

(7)When any proceedings are instituted under this section, it hall be the duty of the liquidator and of every officer and agent of the company past and present (other than the defendant in the proceedings) to give all assistance in connection with the prosecution which he is reasonably able to give.

For the purposes of this sub-section, the expression “agent”, in relation to a company, shall be deemed to include any banker or legal adviser of the company and any person employed by the company as auditor.

(8)If any person fails or neglects to give assistanceinthe manner required by sub-section (7), the Court may, on theapplication ofthe Registrar, direct that person to comply with therequirements that sub-section. liquidator,theCourtmay, unless it appears thatthefailureor neglectwas due to the liquidator not having in his handssufficient assets of the company to enable him so to do, direct that the costs of the application shall be borne by the liquidator personally.

Miscellaneous Provisions

546.Liquidator to exercise certain powers subject to sanction.

(1)The liquidator may –

(a)with thesanction of the Court, when thecompanyis being wound up by or subject to the supervision of the Court; and

(b)with thesanctionof aspecialresolutionofthe company, in the case of a voluntary winding up –

(i)pay any classes of creditors in full;

(ii)make any compromise or arrangement with creditors or personsclaiming to be creditors, orhaving or alleging themselvesto have any claim, present or future, certain or contingent, ascertained or sounding only in damages, against the company, or whereby the company may be rendered liable; or

(iii)compromiseany call or liability to call, debt, and liability capable of resulting in a debt, and anyclaim, presentorfuture, certain orcontingent,ascertainedor soundingonly in damages, subsisting or allegedtosubsist between the company and acontributory oralleged contributory or other debtor or person apprehending liability to the company, and all questions in any way relating toor affecting the assets or liabilities or the winding up ofthe company, on such terms as may be agreed, and take anysecurityforthe discharge of anysuchcall,debt, liability or claim, and give a complete discharge inrespect thereof.

1[(1A)Notwithstanding anything contained in sub-section (1), in the case of a winding up by the Court, the Supreme Court may make rules under section 643 providing that the liquidator may, under such circumstances, if any, and subject to such conditions, restrictions and limitations, if any, as may be specified in the rules, exercise any of the powers referred to in sub-clause (ii) or sub-clause (iii) of sub-section (1) without the sanction of the Court.]

(2)In the case of a voluntary winding up, the exercise by the liquidator of the powers conferred by sub-section (1) shall be subject to the control of the Court.

(3)Any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any such power.

547.Notification that a company is in liquidation.

(1)Where a company is being wound up, whether by or under the supervision of the court or voluntarily, every invoice, order for goods or business letter issued by or on behalf of the company or a liquidator of the company, or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall contain a statement that the company is being wound up.

(2)If default is made in complying with this section, the company, and every one of the following persons who willfully authorises or permits the default, namely, any officer of the company, any liquidator of the company and any receiver or manager, shall be punishable with fine which may extend to five hundred rupees.

548.Books and papers of company to be evidence.

Where a company is being wound up, all books and papers of the company and of the liquidators shall, as between the contributories of the company, be prima facie evidence of the truth of all matters purporting to be therein recorded.

549.Inspection of books and papers by creditors and contributories.

(1)At any time after the making of an order for the winding up of acompany by or subject to the supervision of the Court, any creditor or contributory of the company may, if 2[the Supreme Court], by rules prescribed so permit and in accordance with and subject to such rules but not further or otherwise, inspect the books and papers of the company.

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1.Ins. by Act 65 of 1960, s. 188.

2.Subs. by s. 189, ibid., for “the Central Government”.

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(2)Nothing in sub-section (1) shall be taken as excluding or restricting any rights conferred by any law for the time being in force –

(a)on the Central or a State Government; or

(b)on any authority or officer thereof; or

(c)on any person acting under the authority of any such Government or of any such authority or officer.

Disposal of books and papers of company

550.Disposal of books and papers of company.

(1)When the affairs of a company have been completely wound up and it is about to be dissolved, its books and papers and those of the liquidator may be disposed of as follows, that is to say –

(a)in the case of a winding up byorsubject to the supervision of the Court, in such manner as the Court directs;

(b)in the case of a members’ voluntary winding up, in such manner as the company by special resolution directs; and

(c)in the case of a creditors’ voluntary winding up,in such manner as the committee of inspection or, if there is no such committee as the creditors of the company may direct.

(2)After the expiry of five years from the dissolution of the company, no responsibility shall rest on the company, the liquidator, or any person to whom the custody of the books and papers has been committed, by reason of any book or paper not being forthcoming to any person claiming to be interested therein.

(3)The Central Government may, by rules –

(a)prevent for such period (not exceeding five years from the dissolutionof the company) as theCentralGovernment thinks proper, the destruction of the books and papers ofa company which has been wound up and of its liquidator; and

(b)enable any creditor or contributory of the company to make representations to the Central Government in respect of the matters specified in clause (a) and to appeal to the Courtfrom any direction which may be given by theCentral Government in the matter.

(4)If any person acts in contravention of any such rules or of any direction of the Central Government there under, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.

551.Information as to pending liquidations.

1[(1)If the winding up of a company is not concluded within one year after its commencement,theliquidator shall, unless he isexemptedfrom so doingeither wholly or in part by the Central Government, within two months of the expiry of such year and thereafter until the windingup isconcluded,atintervals of not more than oneyearoratsuch shorterintervals, if any, as may be prescribed, file a statementin theprescribedform and containing the prescribedparticularsduly audited, by a person qualified to act as auditor of the company, with respect to the proceedings in, and position of, the liquidation –

(a)in thecaseof a winding up byorsubjecttothe supervision of the Court, in Court ; and Registrar:

Provided that no such audit as is referred to in this sub-section shall be necessary where the provisions of section 462 apply.]

(2)When the statement is filed in Court under clause (a) of sub-section (1), a copyshallsimultaneouslybefiledwiththe Registrar and shall be kept by him along with the other records of the company.

2[(2A)Where a statement referred to in sub-section (2) relates to a Government company in liquidation, the liquidator shall forward a copy thereof –

(a)to the Central Government, if that Government is a member of the Government company; or

(b)to any State Government, if thatGovernment is a member of theGovernment company; or

(c)to the Central Government and any StateGovernment, if both the Governments are members of theGovernmentcompany.]

(3)Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee,to inspectthestatement, and to receive a copy thereof oranextract therefrom.

(4)Any person untruthfully stating himself to be a creditor or contributory for the above purpose shall be deemed to be guilty of an offence under section 182 of the Indian Penal Code, (45 of 1860.)and shall on theapplicationoftheliquidator, be punishable accordingly.

(5)If a liquidator fails to comply with any of requirements of this section, he shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues:

3[Provided that if the liquidator makes willful default in causing the statement referred to in sub-section (1) to be audited by a person qualified to act as auditor of the company, the liquidator shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.]

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1.Subs. by Act 65 of 1960, s. 190, for sub-section (1).

2.Ins. by Act 31 of 1988, s.56 (w.e.f. 15.6.1988).

3.Added by s.190, ibid.

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552.Official Liquidator to make payments into the public account of India.

Every Official Liquidator shall, in such manner and at such times as may be prescribed, pay the moneys received by him as liquidator of any company, into the public account of India in the Reserve Bank of India.

553.Voluntary liquidator to make payments into Scheduled Bank.

(1)Every liquidator of a company, not being an Official Liquidator, shall, in such manner and at such times as may be prescribed, pay the moneys received by him in his capacity as such into a Scheduled Bank to the credit of a special banking account opened by him in that behalf, and called “the Liquidation Account of

Company Limited”

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—————————-Company Private Limited”:

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Company”

Providedthat if the Court is satisfied that for the purposeof carryingon the business of the company or of obtainingadvancesor foranyotherreason, it is to the advantage ofthecreditors or contributoriesthatthe liquidator should have an accountwithany otherbank,theCourtmay authorise theliquidatortomakehis payments into or out of such other bank as the Court may select; and thereupon those payments shall be made in the prescribed manner and at the prescribed times into or out of such other bank.

(2)If any such liquidator at any time retains for more than ten days a sum exceeding five hundred rupees or such other amount as the Court may, on the application of the liquidator, authorise him to retain, then, unless he explains the retention to the satisfaction of the Court, he shall –

(a)pay interest on the amount so retained inexcess, at therate of twelve per cent. per annum andalsopaysuch penalty as may be determined by the Registrar;

(b)be liable to pay any expenses occasioned by reason of his default; and

(c)also beliable to have all or such part of his remuneration as the Court may think just disallowed, andto be removed from his office by the Court.

Liquidator not to pay moneys into private banking account

554.Liquidator not to pay moneys into private banking account.

Neither the Official Liquidator nor any other liquidator of a company shall pay any moneys received by him in his capacity as such into any private banking account.

555.Unpaid dividends and undistributed assets to be paid into the Companies Liquidation Account.

1[(1)Where any company is being wound up, if the liquidator has in his hands or under his control any money representing –

(a)dividendspayable to any creditor whichhadremained unpaidforsixmonths after the date onwhichtheywere declared, or

(b)assets refundable to any contributory which have remained undistributed for six months after the date on which they became refundable, the liquidatorshall forthwith pay the said moneyintothe public account of India in the Reserve Bank of India in a separate account to be known as the Company’s Liquidation Account.]

(2)Theliquidatorshall, on the dissolution ofthecompany, similarlypay into the said account any money representing 2[unpaid] dividends orundistributed assets in his hands at the dateofdissolution.

(3)The liquidator shall, when making any payment referred to in sub-sections(1)and(2), furnish to such officer as the Central Government may appoint in this behalf, a statement in theprescribed form, setting forth, in respect of all sums included in suchpayment, the nature of the sums, the names and last known addresses of the personsentitledto participate therein, the amount towhich eachis entitled andthe natureofhisclaimthereto,andsuchother particulars as maybe prescribed.

(4)The liquidator shall be entitled to a receipt from the Reserve Bank of India for any money paid to it under sub-sections (1) and (2); and such receipt shall be an effectual discharge of the liquidator in respect thereof.

(5)Where the company is being wound up by the Court, the liquidator shall make the payments referred to in sub-sections (1) and (2) by transfer from the account referred to in section 552.

(6)Where the company is being wound up voluntarily or subject to thesupervision of the Court, the liquidator shall, when filing a statement in pursuance of sub-section (1) of section 551, indicate the sum of money which is payable to the Reserve Bank of India under sub-sections (1) and (2) of this section which he has had in his hands or under his control during the six months preceding the date to which the said statement is brought down, and shall, within fourteen daysof the date of filing the said statement, pay that sum intothe Companies Liquidation Account.

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1.Subs. by Act 65 of 1960, s. 191, for sub-section (1).

2.Subs. by s. 191, ibid., for “unclaimed”.

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(7)(a)Anyperson claiming to be entitled to anymoneypaid into theCompanies Liquidation Account (whether paid in pursuance of thissection or under the provisions of any previouscompanieslaw) mayapplytothe Court for an order for paymentthereof,andthe Court, if satisfied that the person claiming is entitled, may makean order for the payment to that person of the sum due:

Provided that before making such an order, the Court shall cause a notice to be served on such officer as the Central Government may appoint in this behalf, calling on the officer to show cause within onemonthfrom the date of the service of the notice whytheorder shouldnot be made.

(b)Any person claiming as aforesaid may, instead of applying to the Court, apply to the Central Government for an order for payment of the money claimed; and the Central Government may, if satisfied whether on a certificate by the liquidator or the Official Liquidator or otherwise, that such person is entitled to the whole or any part of the money claimed and that no application made in pursuance of clause (a) is pending in the Court, make an order for the paymentto that personof the sum due to him, after taking such security from himas it may think fit.

(8)Any money paid into the Companies Liquidation Account in pursuance of this section, which remains unclaimed thereafter for a period of fifteen years, shall be transferred to the general revenue account of the Central Government; but a claim to any money so transferred may be preferred under sub-section (7) and shall be dealt with as if such transfer had not been made, the order, if any, for payment on the claim being treated as an order for refund of revenue.

(9)Any liquidator retaining any money which should have been paid by him into the Companies Liquidation Account under this section shall –

(a)pay intereston the amount retained atthe rate of twelve per cent per annum, and also pay such penalty asmay be determined by the Registrar:

1[Provided that the Central Government may in any proper case remit either in part or in whole the amount of interest which the liquidator is required to pay underthis clause ;]

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1.Ins. by Act 65 of 1960, s. 191.

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(b)be liable to pay any expenses occasioned by reason of his default; and

(c)where the winding up is by or under the supervision of theCourt,also be liable to have all or such partofhis remunerationas the Court may think just tobedisallowed, and to be removed from his office by the Court.

556.Enforcement of duty of liquidator to make returns, etc.

(1)Ifany liquidator who has made any default in filing delivering or making any return, account or other document, or in giving any notice which he is by law required to file, deliver, make or give, fails to make good the default within fourteen days after the service on him of a notice requiring him to do so, the Court may, on an application made to the Court by any contributory or creditor of the company or by the Registrar make an order directing the liquidator to make good the default within such time as may be specified in the order.

(2)Any such order may provide that all costs of and incidental to theapplication shall be borne by the liquidator.

(3)Nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on a liquidator in respect of any such default as aforesaid.

Supplementary Powers of Court

557.Meetings to ascertain wishes of creditors or contributories.

(1)In all matters relating to the winding up of a company, the Court may –

(a)have regard to the wishes of creditors or contributories of thecompany as proved toitby any sufficient evidence;

(b)if it thinks fit for the purpose of ascertainingthose wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner astheCourt directs; and

(c)appoint a person to act as chairman of any such meeting and to report the result thereof to the Court.

(2)When ascertaining the wishes of creditors, regard shall be had to thevalue of each creditor’s debt.

(3)When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory.

558.Court or person before whom affidavit may be sworn.

(1)Any affidavit required to be sworn under the provisions, or for the purposes, of this Part may be sworn –

(a)in India, before any Court, Judge orpersonlawfully authorised to take and receive affidavits; and

(b)in any other country, either before any Court, Judge or person lawfully authorised to take and receive affidavits in that country or before an Indian Consul or Vice Consul.

1*****

(2)All Courts, Judges, Justices, Commissioners and persons acting judicially in India shall take judicial notice of the seal, stamp or signature, as the case may be, of any such Court,Judge,person, Consul orVice-Consul, attached, appended or subscribed to anysuch affidavit or to any other document to be used for the purposes of this Part.

Provisions as to Dissolution

559.Power of Court to declare dissolution of company void.

(1)Where a company has been dissolved, whether in pursuance of this Part or of section 394 or otherwise, the Court may at any time within two years of the date of the dissolution, on application by the liquidator of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolutionto have been void; and thereupon such proceedingsmay be taken as might have been taken if the companyhad not been dissolved.

(2)It shall be the duty of the person on whose application the order was made, within 2[thirty] days after the making of the order or such further time as the Court may allow, to file a certified copy of the order with the Registrar who shall register the same; and if such person fails so to do, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

560.Power of Registrar to strike defunct company off register.

(1)Where the Registrar has reasonable cause to believe that a company is not carrying on-business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation.

(2)If the Registrar does not within one month of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, send to the company by post a registered letterreferringtothe first letter, and statingthatnoanswer theretohas been received and that, if an answer is notreceivedto thesecondletter within one month from the date thereof, a notice will be published in the Official Gazette with a view to strikingthe name of the company off the register.

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1.Explanation omitted by Act 62 of 1956, s. 2andSch.(w.e.f. 1-11-1956).

2.Subs.byAct 31 of 1965, s. 62 andSch.,for”twenty-one” (w.e.f. 15-10-1965).

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(3)If the Registrar either receives an answer from the company to the effect that it is not carrying on business or in operation, or does not within one month after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will, unless cause is shown to the contrary, be struck off the resister and the company will be dissolved.

(4)If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no liquidator is acting, or that the affairs of the company have been completely wound up, and any returns required to be made by the liquidator have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the liquidator, if any, a like notice as is provided in subsection (3).

(5)At the expiry of the time mentioned in the notice referred to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register and shall publish notice thereof in the Official Gazette; and on the publication in the Official Gazette of this notice, the company shall stand dissolved:

Provided that –

(a)the liability, if any, of every director, the managing agent,secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and

(b)nothing in this sub-section shall affect the power of the Courtto wind up a company the name of whichhas been struck off the register.

(6)If a company, or any member or creditor thereof,feels aggrieved bythe company having been struck off the register, the Court, on an application made by the company,memberorcreditor before the expiry of twenty years from the publication in the Official Gazetteof the notice aforesaid, may, if satisfied thatthecompany was, at the timeofthe striking off, carrying on business orinoperationor otherwisethatitisjust that thecompany be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order, give such directions and make such provisions as seem just for placing the company and all otherpersons in the same position as nearly as may be as if the name of the company had not been struck off.

(7)Upon a certified copy of the order under sub-section (6) being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its namehadnotbeen struck off.

(8)A letter or notice to be sent under this section to a company may beaddressed to the company at its registeredoffice, or if no office has been registered, to the care of some director, the managing agent,secretariesand treasurers, manager or other officerofthe company,or if there is no director, managing agent, secretariesand treasurers,manager or officer of the company whose name and address areknownto the Registrar, may be sent to each of thepersonswho subscribedthe memorandum, addressed to him at the addressmentioned in the memorandum.

(9)A notice to be sent under this section to a liquidator may be addressed to the liquidator at his last known place of business.

PART VIII

561. APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUS COMPANIES LAWS

This Act shall apply to existing companies as follows –

(a)in the case of a limited company other than a company limited by guarantee, this Act shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by shares;

(b)in the case of a company limited by guarantee, this Act shallapply in the same manner as if the companyhadbeen formed and registered under this Act as a company limitedby guarantee; and

(c)in the case of a company other than a limitedcompany, this Act shall apply in the same manner as if the company hadbeen formedandregisteredunderthisActasan unlimited company:

Provided that –

(i)nothing in TableA in Schedule I shallapply to a company formed and registered under Act 19 of 1857 and Act 7 of 1860 or either of them, or under the Indian Companies Act, 1866, (10 of 1866.) or the Indian Companies Act, 1882; (6of 1882.)

(ii)reference express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous companies law concerned.

562.Application of Act to companies registered but not formed under previous companies laws.

This Act shall apply to every company registered but not formed under any previous companies law in the same manner as it is in Part IX of this Act declared to apply to companies registered but not formed under this Act:

Providedthatreference,express or implied, tothedateof registrationshall be construed as a reference to the dateatwhich the company was registered under the previous companies law concerned.

563.Application of Act to unlimited companies re-registered under previous companies laws.

This Act shall apply to every unlimited company registered as a limited company in pursuance of any previous companies law inthe same manner as it applies to an unlimited company registered in pursuance of this Act as a limited company:

Providedthatreference,express or implied, tothedateof registrationshall be construed as a reference to the dateatwhich the companywas registered as a limited company under the previous companies law concerned.

564.Mode of transferring shares in the case of companies registered under Acts 19 of 1857 and 7 of 1860.

A company registered under Act 19 of 1857 and Act 7 of 1860 or either of them may cause its shares to be transferred in the manner hitherto in use, or in such other manner as the company may direct.

PART IX

COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT

565.Companies capable of being registered.

(1)With the exceptions and subject to the provisions contained in this section –

(a)any company consisting of seven or more members,which was in existence on the first day of May, 1882, including any company registered under Act No. 19 of 1857 and ActNo. 7 of 1860 or either of them or under any laws or law in force ina Part B State, corresponding to those Acts or eitherof them; and

(b)any company formed after the date aforesaid, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other Indian law (including a law in force in a Part B State), or of any Act of Parliament of the United Kingdom or Letters Patent in force in India, or being otherwise duly constituted according to law, and consisting of seven or more members;

may at any time register under this Act as an unlimited company, or as a company limited by shares, or as a company limited byguarantee; andthe registration shall not be invalid by reason only that ithas taken place with a view to the company’s being wound up:

Provided that –

(i)a company registered under the Indian CompaniesAct, 1882,(6 of 1882.)or under the Indian Companies Act, 1913,(7 of 1913.)shall not register in pursuance of this section;

(ii)a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, and not being a joint stock company as defined in section 566, shall not register in pursuance of this section;

(iii)a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in aPartB State),orany Act of Parliament of the UnitedKingdom or Letters Patent in force in India, shall not register inpursuanceofthissection as an unlimitedcompanyorasa company limited by guarantee;

(iv)a company that is not a joint stock company asdefined insection566shall not register in pursuance of this section as a company limited by shares;

(v)a companyshallnot register in pursuance of this sectionwithouttheassent of a majority ofsuch of its members asare present in person, or where proxies are allowed, by proxy, at a generalmeeting summoned for the purpose;

(vi)where a company not having the liability of its members limited by any Act of Parliament or any other Indian law (including a law in force in a Part B State) or by any Act of Parliament of the United Kingdom or Letters Patent in force in India is about to register as a limited company, the majority required to assent as aforesaid shall consist of not less than three-fourths of the members present in person,or where proxies are allowed, by proxy, at the meeting;

(vii)where a company is about to register as a company limitedby guarantee, the assent toits being so registered shall be accompanied by aresolutiondeclaring thateach member undertakes to contribute to theassets of the company in the event of its being wound up while he is a member or within one year after he ceases to beamember for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceasesto be a member, and of the costs,chargesand expenses of winding up, and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(2)In computing any majority required for the purposes of sub-section (1) when a poll is demanded, regard shall be had to the number of votes to which each member is entitled according to the regulations of the company.

(3)Nothing in this section shall be deemed to apply to any company the registered office whereof at the commencement of this Act is in Burma, Aden or Pakistan, 1* * *.

566.Definition of “joint-stock company”.

(1)For the purposes of this Part, so far as it relates to the registration of companies as companies limited by shares, a joint stock company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the principle of having for its members the holders of those sharesor that stock, and no other persons.

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1.The words “or in the State of Jammu and Kashmir” omitted by Act 62 of 1956, s. 2 and Sch. (w.e.f. 1-11-1956).

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567.Requirements for registration of joint-stock companies.

Before the registration in pursuance of this Part of a joint stock company, there shall be delivered to the Registrar the following members of the company, with the addition of the shares or stock held by them respectively, distinguishing, in cases where the shares are numbered, each share by its number;

(b)a copy of any Act of Parliament or other Indian law, Actof Parliamentof the UnitedKingdom,RoyalCharter, Letters Patent, deed of settlement, deed ofpartnership or other instrument constituting or regulating the company; and

(c)if the company is intended tobe registered as a limited company, a statement specifying the followingparticulars –

(i)the nominal share capital of the company andthe number of shares into which it is divided or theamount of stock of which it consists;

(ii)the number of shares taken and the amount paid on eachshare;

(iii)the name of the company, with the addition of the word “Limited” or “Private Limited” as the casemay require, as the last word or words thereof; and

(iv)in the case of a company intended to be registered as a company limitedby guarantee,acopyofthe resolution declaring the amount of the guarantee.

568.Requirements for registration of companies not being joint-stock companies.

Before the registration in pursuance of this Part of any company not being a joint-stock company, there shall be delivered to the Registrar the following documents –

(a)a list showing the names, addresses and occupations of the directors, the managing agent, if any,thesecretaries and treasurers, if any, and the manager, if any, of the company;

(b)a copy of any Act of Parliament or other Indian law, Act of Parliament of the United Kingdom, Letters Patent, deed of settlement, deed ofpartnershiporotherinstrument constituting or regulating the company; and

(c)in the case of a company intended to be registered as a company limitedbyguarantee, a copy of the resolution declaring the amount of the guarantee.

569.Authentication of statements of existing companies.

The lists of members and directors and any other particulars relating to the company required to be delivered to the Registrar shall be duly verified by the declaration of any two or more directors or other principal officers of the company.

570.Power of Registrar to require evidence as to nature of company.

The Registrarmay requiresuchevidenceas hethinks necessary for the purpose of satisfying himself whetherany company proposingto be registered is or is not a joint-stock company asdefined in section 566.

571.Notice to customers on registration of banking company with limited liability.

(1)Where a banking company which was in existence on the first day of May, 1882, proposes to register as a limited company under this Part, it shall, at least thirty days before so registering, give notice of its intention so to register, to every person who has a banking account with the company, either by delivery of the notice to him, or by posting it to him at, or delivering it at, his last known address.

(2)If the banking company omits to give the notice required by sub-section (1), then, as between the company and the person forthe time being interested in the account in respect of whichthenotice oughtto have been given, and so far as respects the account down to thetime at which notice is given, but not further or otherwise, the certificateofregistrationwith limited liabilityshallhaveno operation.

572.Change of name for purposes of registration.

Where the name of a company seeking registration under this Part is one which in the opinion of the Central Government is undesirable, the company may, with the approval of the Central Government signified in writing, change its name with effect from the date of its registration under this Part:

Provided that the like assent of the members of the company shall be required to the change of name as is required by section 565 to the registration of the company under this Part.

573.Addition “Limited” or “Private Limited” to name.

When a company registers in pursuance of this Part with limited liability, the word “Limited” or the words “Private Limited” as the case may be, shall form, and be registered as, the last word or words of its name:

Provided thatthis section shall not be deemed toexcludethe operation of section 25.

574.Certificate of registration of existing companies.

On compliance with the requirements of this Part with respect to registration, and on payment of such fees, if any, as are payable under Schedule X, the Registrar shall certify under his hand that the company applying for registration is incorporated as a company under this Act, and in the case of a limited company that it is limited and thereupon the company shall be so incorporated.

575.Vesting of property on registration.

All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, onsuchregistration, pass to and vestinthecompany as incorporatedunder this Act, for all the estate and interestofthe company therein.

576.Saving for existing liabilities.

The registration of a company in pursuance of this Part shall not affect its rights or liabilities in respect of any debt or obligation incurred, or any contract entered into, by, to, with, or on behalf of, the company before registration.

577.Continuation of pending legal proceedings.

All suits and other legal proceedings taken by or against the company, or any public officer or member thereof, which are pending at the time of the registration of a company in pursuance of this Part, may be continued in the same manner as if the registration had not taken place:

Provided that execution shall not issue against the property or person of any individual member of the company on any decree or order obtained in any such suit or proceeding; but, in the event of the property of the company being insufficient to satisfy the decree or order, an order may be obtained for winding up the company.

Effect of registration under Part

578.Effect of registration under Part.

(1)When a company is registered in pursuance of this Part, sub-sections (2) to (7) shall apply.

(2)All provisions contained in any Act of Parliament or other Indian law, or other instrument constituting or regulating the company, including, in the case of a company registered as acompany limited by guarantee, the resolution declaring theamountofthe guarantee,shallbe deemed to be conditions and regulationsofthe company, in the same manner and with the same incidents as if somuch thereof as would, if the company had been formed under this Act,have beenrequired to be inserted in the memorandum, were containedin a registeredmemorandum,andthe residue thereofwerecontainedin registered articles.

(3)All the provisions of this Act shall apply to the company and themembers, contributories and creditors thereof, inthesame mannerinallrespects as if it had beenformedunderthisAct, subject as follows –

(a)Table A in Schedule I shall not apply unless and except in so far as it is adopted by special resolution;

(b)the provisions of this Act relating to the numbering of sharesshall not apply to any joint-stock company whose shares are not numbered;

(c)subject to the provisions of this section, thecompany shall not have power to alter any provision contained in any Act of Parliamentorother Indianlawrelatingtothe company;

(d)subject to the provisions of this section, the company shallnot have power, without the sanction of the Central Government, to alter any provision contained in anyAct of Parliament of the United Kingdom, Royal CharterorLetters Patent, relating to the company;

(e)the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law or in any Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, with respect to the objects of the company;

(f)in the eventof the company beingwoundup, every person shall be a contributory, in respect of the debts and liabilities of the company contracted before registration, who is liable to pay or contribute to the payment of any debt or liability of the company contracted beforeregistration, or topay or contribute to the payment of any sumforthe adjustmentof the rights of the members among themselves in respectofanysuchdebtorliability, or to pay or contribute to the payment of the costs, chargesand expenses of winding up the company, sofaras relates to such debts or liabilities as aforesaid;

(g)in the eventof the company beingwound up, every contributoryshall be liable to contribute to the assetsof thecompany, in the course of the winding up, allsumsdue fromhim in respect of any such liability as aforesaid; and in the event of the death or insolvency of anycontributory, the provisionsofthisActwithrespectto the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may to –

(a)the registration of an unlimited as a limited company;

(b)the powers of an unlimited company on registration as a limited company, to increase the nominal amount of its share capitaland to provide that a portion of its share capital shall not be capable of being called up except in theevent of winding up;

(c)the powerof a limited company todetermine that a portionof its share capital shall not be capableofbeing called up except in the event of winding up;

shall apply, notwithstanding any provisions contained in any Act of parliament or other Indian law, or other instrumentconstituting or regulating the company.

(5)Nothing in this section shall authorise the company to alter any such provisions contained in any instrument constituting or regulating the company as would, if the company had originally been formed under this Act, have been required to be contained in the memorandum and are not authorised to be altered by this Act.

(6)None of the provisions of this Act (apart from those of section 404) shallderogate from any power of alteringits constitution or regulations which may be vested in the company, by virtue of any Act of Parliament orother Indian law, or other instrument constituting or regulating the company.

(7)In this section, the expression “instrument” includes deed of settlement, deed of partnership, Act of Parliament of the United Kingdom, Royal Charter and Letters Patent.

579.Power to substitute memorandum and articles for deed of settlement.

(1)Subject to the provisions of this section a company registered in pursuance of this Part may, by special resolution, alter the form of its constitution by substituting a memorandum and articles for a deed of settlement.

(2)The provisions of sections 17 and 19 with respect to an alteration of the objects of a company shall, so far as applicable, applytoanyalterationunderthissectionwiththefollowing modifications –

(a)there shall be substituted for the printed copy of the altered memorandum required to be filed with the Registrar a printed copy of the substituted memorandum and articles; and

(b)on the registration of the alteration being certified by theRegistrar, the substituted memorandumandarticles shall apply to the company in the same manner as if it were a companyregistered under this Act with thatmemorandumand thosearticles, and the company’s deed ofsettlementshall cease to apply to the company.

(3)An alteration under this section may be made either with or without any alteration of the objects of the company under this Act.

(4)Inthissection,theexpression “deed of settlement” includes anydeed of partnership, Act of Parliamentofthe United Kingdom,RoyalCharterorLettersPatent, or other instrument constituting or regulating the company, not being an Act of Parliament or other Indian law.

580.Power of Court to stay or restrain proceedings.

The provisions of this Act with respect to staying and restraining suits and other legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of a company registered in pursuance of this Part, where the application to stay or restrain is by a creditor, extend to suits and other legal proceedings against any contributory of the company.

581.Suits stayed on winding up order.

Where an order has been made for winding up, or a provisional liquidator hasbeenappointed for, a company registered in pursuance of this Part, no suit orother legalproceedingshall be proceeded with orcommencedagainstthe Company or any contributory of the company in respect of any debtof the company, except by leave of the Court and except on such termsas the Court may impose.

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PART X

WINDING UP OF UNREGISTERED COMPANIES

582.Managing of “unregistered company”.

For the purposes of this Part, the expression “unregistered company” –

(a)shall not include –

(i)a railway company incorporated by any Act of Parliament or other Indian law or any Act ofParliament of the United Kingdom;

(ii)a company registered under this Act; or

(iii)a company registered under any previous companies law and not being a company the registered office whereof was in Burma, Aden orPakistanimmediately before the separation of that country from India 1* **; and

(b)save as aforesaid, shall include any partnership, association or company consisting of more than seven members 2[at the time when the petition forwindingupthe partnership,association or company, as the case may be, is presented before the Court].

Winding up of unregistered companies

583.Winding up of unregistered companies.

(1)Subject to the provisions of this Part, any unregistered company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered company, with the exceptions and additions mentioned in sub-sections (2) to (5).

(2)For the purpose of determining the Court having Jurisdiction in thematter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where ithas a principalplace of business; and the principal place ofbusiness situate in that State in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company.

(3)No unregistered company shall be wound up under this Act voluntarily or subject to the supervision of the Court.

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1.Certain words omitted by Act 62 of 1956, s.2andSch. (w.e.f. 1-11-1956).

2.Ins. by Act 65 of 1960, s. 192.

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(4)The circumstances in which an unregistered company may be wound up are as follows –

(a)if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purposeof winding up its affairs;

(b)it the company is unable to pay its debts;

(c)if the Court is of opinionthat it is just and equitable that the company should be wound up.

(5)An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts –

(a)if a creditor, by assignment or otherwise, to whomthe companyis indebted in a sum exceeding fivehundredrupees then due, has served on the company,by leavingatits principalplaceofbusiness, or by deliveringtothe secretary, or some director, managing agent, secretaries and treasurers,manager or principal officer of the company, or by otherwise serving in such manner as the Court mayapprove or direct, a demand under his hand requiring the companyto paythesum so due, and the company has,forthreeweeks after the service of the demand, neglected to pay the sum or tosecureorcompound for it to thesatisfactionofthe creditor;

(b)ifanysuitorotherlegalproceedinghasbeen instituted against any member for any debt or demand due,or claimedtobedue, from the company, or fromhiminhis character of member, and notice in writing of the institution ofthe suit or other legal proceeding having been servedon thecompanyby leaving the same at its principalplace of business orbydelivering it to the secretary, or some director, managing agent, secretaries and treasurers, manager orprincipal officer of the company or by otherwiseserving the same in such manner as the Court may approve ordirect, thecompanyhas not, within ten days after serviceofthe notice –

(i)paid, secured or compounded for the debt or demand; or

(ii)procured the suit or other legal proceeding tobe stayed; or

(iii)indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred byhim by reason of the same;

(c)if execution or other process issued on a decree ororder of any Court in favour of acreditoragainst thecompany,orany member thereof assuch,orany personauthorisedto be sued as nominaldefendanton behalf of the company, is returned unsatisfied inwhole or in part;

(d)if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.

584.Power to wind up foreign companies, although dissolved.

Where a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part, notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

585.Contributories in winding up of unregistered company.

(1)In the eventof an unregistered company being wound up, everyperson shallbedeemedtobe a contributory, who isliabletopay,or contribute to the payment of –

(a)any debt or liability of the company; or

(b)any sum for the adjustment of the rights of the members among themselves; or

(c)thecosts,chargesand expenses ofwindingupthe company.

(2)Everycontributoryshall be liable tocontribute tothe assets of thecompanyallsumsduefrom himinrespect ofany liability to pay or contribute as aforesaid.

(3)In the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

586.Power to stay or restrain proceedings.

The provisions of this Act with respect to staying and restraining suits and legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of an unregistered company, where the application to stay or restrain is by a creditor, extend to suits and legal proceedings against any contributory of the company.

587.Suits, etc., stayed or winding up order.

Where an order has been made for winding up an unregistered company, no suit or other legal proceeding shall be proceeded with or commenced against any contributory ofthe company in respect of any debt ofthecompany, except by leave of the Court and except on such terms as the Court may impose.

588.Directions as to property in certain cases.

(1)If an unregistered company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the Court may, by the windingup order or by any subsequent order, direct that allor any partoftheproperty, movable orimmovable(includingactionable claims), belonging to the company or held by trustees on itsbehalf, shallvestinthe Official Liquidator byhis official name; and thereupontheproperty or the part thereof specifiedintheorder shall vest accordingly.

(2)The Official Liquidator may, after giving such indemnity, if any, as the Court may direct, bring or defend in his official name any suit orlegal proceeding relating to that property, or which it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property.

589.Provisions of Part cumulative.

(1) The provisions of this Part with respect to unregistered companies shall be in addition to and not in derogation of, any provisions hereinbefore in this Act contained with respect to the winding up of companies by the Court.

(2)The Court or Official Liquidator may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by the Court or Official Liquidator in winding up companies formed and registered under this Act :

Providedthat an unregistered company shall not, exceptinthe event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Part.

590.Saving and construction of enactments conferring power to wind up partnership, association or company in certain cases.

Nothing in thisPartshallaffect the operation ofanyenactment which providesfor any partnership, association or company being woundup, orbeing wound up as a company or as an unregisteredcompany,under theIndianCompanies Act, 1913 (7 of 1913.) or any Actrepealedby that Act :

Provided that references in any such enactment to anyprovision contained in the Indian Companies Act, 1913 (7 of 1913.) or in any Act repealed by that Act shall be read as references to thecorresponding provision, if any, contained in this Act.

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