KNOWLEDGE ACADEMY

Phone : X Y Z

CHAPTER-10 WINDING UP
1.
1. 7.

GROUNDS OR COMPULSORY WINDING UP !Se". #$$%

G&o'n() *o& "o+,'-)o&. /0n(0n1 ', The "o+,6n. ,6))e) 6 ),e"06&e)o-'20on De*6'-2 o* Se". 189 0) +6(e: 0.e.: (a) Default is made in filing the statutory report (b) Default is made in holding the statutory meeting Non-"o++en"e+en2 o& )'),en)0on o* ;')0ne)) !6% <')0ne)) no2 "o++en"e( - within year of incorporation; or !;% <')0ne)) )'),en(e( ! for year or more. Re('"20on 0n n'+;e& o* +e+;e&) ;e-o/ )262'2o&. +0n0+'+ In6;0-02. 2o ,6. (e;2) !6% C&e(02o& no2 ,60( - Conditions% The debt due to the creditor e"ceeds &s. '((. The creditor had demanded the payment of debt by serving a notice at the registered office. The company neglects to pay or compound or secure the debt within ) wee$s. This ground can be invo$ed even if the creditor became the creditor by assignment. !;% Co'&2 (e"&ee 'n)620)*0e( - If any decree awarded by the Court remains unsatisfied* whether in whole or in part* the Court may order winding up. !"% S620)*6"20on o* 2he Co'&2 ! The Court may order winding up if it is satisfied that the company is Con(020on) 3E4"e,20on)3 /0n(0n1 ', o&(e& (en0e(5 /hen 0)

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The Court has the discretion to deny the winding up order. It may instead direct the company to (a) deliver the statutory report; and (b) hold the statutory meeting. The Court may dismiss the petition if(a) the delay is sufficiently e"plained; or (b) the ma#ority of shareholders oppose the winding up. This ground cannot be invo$ed unless the entire business is suspended.

#. 9.

The Court may dismiss the petition if the Court is satisfied that there is a bonafide dispute. Instead of ma$ing a winding up order* the Court may direct the company to furnish security.

KNOWLEDGE ACADEMY
Phone : X Y Z

8.

unable to pay its debts. =')2 6n( e>'026;-e 1&o'n( The Court may dismiss the petition if the The Court must be satisfied that petitioner is acting unreasonably in (a) there are #ust and e+uitable grounds as$ing for a winding up order. for winding up the company; and (b) there is no alternate remedy.

7.

PETITION OR COMPULSORY WINDING UP !Se". #$?%

Co+,6n. : The company may file a petition where it has passed ,& for compulsory winding up. C&e(02o& - creditor can file a petition only on the ground of inability to pay debts. The petition is not maintainable if the debt has become time barred. Re10)2&6& The registrar must obtain the previous approval of C.. C. shall first give an opportunity of being heard to the company. Con2&0;'2o&. : If petition is filed on any ground other than the ground of reduction in number of members below statutory limit* any of the following conditions must be fulfilled% (a) The contributory must be an original allottee of shares. (b) /e must have held his shares for at least 0 months during 1 months immediately preceding the commencement of winding up. (c) The shares must have devolved on him by reason of death of a member. CG : -fter considering the inspector2s report of investigation* C. may present a petition to the Court for winding up the company on #ust and e+uitable ground (,ec. 34)).

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WINDING UP <Y THE COURT - A DISCRETIONARY POWER !T626 I&on 6n( S2ee- Co. @ M0"&o o&1e !In(06% L2(.%

Re+e(. '3) #$$ -No2 6 +622e& o* &01h2: ;'2 6 (0)"&e20on o* Co'&2 5inding up is a measure of last resort. 6ven if the debt is proved and even if the inability to pay the debt is also shown* or merely because one of the circumstances enumerated in section 4)) e"ist* the Court is not bound to order the winding up. The first thing the Court would do is to consider the impact and conse+uences of winding up. Den06- o* /0n(0n1 ', o&(e& : - winding up order may not be #ustified in the following cases% 5here profitability* turnover* reserves and soundness of a company is beyond +uestion. If there is temporary cash crisis despite high sales and heavy turnover. If company has shown considerable growth in the past and is a growth oriented enterprise. -3-

KNOWLEDGE ACADEMY
Phone : X Y Z

If it would not benefit company2s creditors in general. If it is in the interest of #ustice to give the company some time to come out of the momentary financial crisis or any other temporary difficulty. If the inability to pay debts is due to a temporary shoc$ of economy and mar$et and not due to any deliberate or designed action.

PRACTICAL PRO<LEMS ROM CA EXAMINATIONS De;2 o* R). #00 6))01ne( 2o 6 "&e(02o& &e+60n) 'n,60( - /he2he& "o+,6n. I) 'n6;-e 2o ,6. 02) (e;2)5 !Se". #$$ 6n( #$#% !No@. 1??A% ( ) 789 Co. :td. owes a sum of &s. '*((( to ,* who assigns this debt to his two creditors vi;. &% to an e"tent of &s. 4*0(( and <% to an e"tent of &s. 4((. < ma$es a demand for his money from the company by giving a legal notice. The company could not meet his (<2s) demand or otherwise satisfy him till the e"piry of four wee$s from the date of notice. <* therefore* moves to the Court with a petition for winding up of the company. &eferring to the provisions of the Companies -ct* ='0 decide whether <2s petition can be accepted by the Court and company can be wound up. An). The&e 0) no 0n6;0-02. 2o ,6. (e;2) : since the amount of his debt is &s. 4(( (i.e.* not more than &s. '((* being the sum prescribed u>s 4))(e) read with ,ec. 4)4). L06;0-020e) e4"ee( 6))e2) - /he2he& I+,-0e) 0n6;0-02. 2o ,6. (e;2) 5 !Se". #$$ 6n( #$#% !No @. 1???% (3) The balance sheet of <>s. /ush /ush :td.* as at ) .). === filed with registrar of companies* <umbai disclosed that the liabilities amounted to &s. 3.?' crores as against the assets of &s. .3' crores. @n the basis of the scrutiny of the Aalance ,heet* the registrar filed a winding up petition against the company stating that it is commercially insolvent and that the company is unable to pay its debts on the ground that the value of liabilities far e"ceeded the value of assets. 6"amine whether the company has any case to defend against the winding up petition filed by the registrar. An). The&e I) no 0n6;0-02. 2o ,6. (e;2) since <>s /ush /ush :td. is able to pay all its liabilities as and when they become due. The fact that the liabilities e"ceed the assets* is immaterial. S'),en)0on o* one o* ;')0ne))e) - /he2he& /0n(0n1 ', "6n ;e o&(e&e(5 !Se". #$$% !M6. 1??A% ()) 6"amine with reference to the provisions of the Companies -ct* ='0 whether winding up can be ordered by the Court in case the Aoard of directors of the company decides to discontinue one of its businesses. 5ould your answer differ in case the company suspends the entire businessB 6"plain. An). No /0n(0n1 ', I* one ;')0ne)) 0) )'),en(e( : since ,ec. 4))(c) is attracted only if a company suspends all its businesses. -)-

KNOWLEDGE ACADEMY
Phone : X Y Z

W0n(0n1 ', I* 6-- ;')0ne))e) 6&e )'),en(e( if such suspension continues for year. /owever* it is the discretion of the Court whether to order winding up or not. Whe2he& 2he "o+,6n. h6) )'),en(e( 02) ;')0ne)) - 6 *e/ "6)e) !Se". #$$% !M6. 1??B% (4) 789 Co. :td. has its subsidiary company C&< :td.* which is formed to carry out some of the ob#ectives of 789 Co. :td. 789 :td. suspends one of its several businesses* by passing a resolution at the company2s e"traordinary general meting with effect from st Danuary* ==?. The business so suspended continues to be suspended until <arch* ==?. @n st -pril* ==? a group of shareholders of 789 :td. file a petition in the Court for winding of the company on the ground of suspension of business by the company. &eferring to the provisions of the Companies -ct* ='0 decide% (i) 5hether the shareholder2s contention shall be tenableB (ii) 5hat would be your answer in case 789 :td. suspends all its businessB (iii) Can shareholders of C&< :td. file a petition in the Court for winding up their company (C&< :td.) on the ground that the holding company vi;. 789 :td. has suspended its entire businesses* though C&< :td. has not suspended its businessB An). !0% W0n(0n1 ', ,e2020on 0) no2 @6-0( since only one of the several businesses has been suspended !00% !000% since the suspension has been for less than year* W0n(0n1 ', ,e2020on 0) no2 @6-0( since such suspension has not lasted for year

even if 789 :td. suspends all the businesses. No ,e2020on ;. )h6&eho-(e&) o* PRM L0+02e( : since petition for winding up of 789 Co. :td. can be made only when 789 Co. :td. suspends all its businesses for year or more. Co+,6n. ,6.0n1 6-- ('e) &e1'-6&-. - /he2he& (e*6'-2 In ,6.+en2 o* ;6nC -o6n +6Ce) I2 -06;-e 2o ;e /o'n( ',5 !Se". #$$ 6n( #$#% !No@. 7007% (') CE& :imited had ta$en a loan of &s. 3 crores from a ban$ secured by some of its assets. The company has defaulted in the matter of payment of some installments of loan as per terms of the loan agreement. The ban$ has filed a petition in the /igh Court on the ground that the company is unable to pay its debts. The company opposes the petition for winding up on the ground that it has employed *((( wor$ers* paid their salaries regularly and that it has paid all the ta" dues to the .overnment. The company has further contended that if the company is compelled to repay the loan immediately* it will cripple the company causing hardship to employees and other persons having business dealings with the company. The company is also supported by some ma#or creditors.

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KNOWLEDGE ACADEMY
Phone : X Y Z

6"plain the circumstances under which a company may be ordered to be wound up by the Court on the ground of inability to pay its debts and whether the ban$ will succeed in this case. An). The&e 0) 0n6;0-02. 2o ,6. (e;2) : since the company has defaulted in payment of installments of ban$ loan* Co'&2 +6. no2 o&(e& /0n(0n1 ', since the power of the Court to order winding up is discretionary since the Court shall consider the interest of *((( wor$ers* temporary cash crisis* loss of ta"es to the .overnment* loss of production* loss of business* probable hardship on other creditors* and public policy if the Court decides that it is not in the interest of #ustice to wind up the company DT626 I&on 6n( S2ee- Co. @ M0"&o o&1e !In(06% L2(.E. #. THE O ICIAL LIFUIDATOR !Se". ##B 2o #9$% O**0"06- -0>'0(62o& 2o ;e L0>'0(62o& : @nly an @fficial :i+uidator can be appointed as li+uidator of a company No 6,,o0n2+en2 o* &e"e0@e& : 5here official li+uidator has been appointed* no receiver shall be appointed to realise the assets of the company. G6-0(02. o* 6"2) The acts of a li+uidator shall be valid* notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or dis+ualification. /owever* where his appointment has been shown as invalid or to have terminated* all his subse+uent acts shall be invalid. ee) 2o CG The company shall not pay any remuneration to the official li+uidator. The official li+uidator shall receive the remuneration from C.. C. may charge fees from the company. #A. COMMENCEMENT O WINDING UP !Se". ##1% W0n(0n1 ', ;. Co'&2 : The time of presentation of winding up petition. Go-'n26&. /0n(0n1 ', : The time of passing resolution for voluntary winding up. 9. THE PROGISIONAL LIFUIDATOR !Se". #90% T0+e o* +6C0n1 6,,o0n2+en2 : The Court is empowered to appoint a provisional li+uidator pending the decision of I winding up petition. O;He"2 o* 6,,o0n2+en2 To protect the creditors To safeguard the assets of the company. O,,o&2'n02. 2o 2he "o+,6n. : Aefore ma$ing the appointment of provisional li+uidator* a notice shall be served on the company. -n opportunity shall be given to the company to ma$e representations. A,,o0n2+en2 o* ,&o@0)0on6- -0>'0(62o& 0) 6 (&6)20" +e6)'&e -'-

KNOWLEDGE ACADEMY
Phone : X Y Z

The appointment of provisional li+uidator shall be made only if the Court is satisfied that such appointment is absolutely necessary. The appointment of provisional li+uidator may be made if(a) the company is insolvent; or (b) the application is presented by the company itself; or (c) the application is unopposed FGirendra ,ingh v Handlal Ahandari I ,ons Cvt. :td.J* Po/e&) o* P&o@0)0on6- -0>'0(62o& /e shall have same powers as that of a li+uidator. /owever* his powers may be restricted by the Court. 8. POWERS O THE COURT UNDER COMPULSORY WINDING UP 1. Po/e&) o* 2he Co'&2 ;e*o&e +6C0n1 /0n(0n1 ', o&(e& Po/e& 2o )26. )'02) : The Court may stay any suit pending in any Court (other than a suit pending in ,C or /C). Cower to decide petition (a) Dismiss it (b) 5inding up order (c) -d#ourn (d) Interim order. Po/e& 2o o&(e& /0n(0n1 ', : The Court may ma$e a winding up order if it is #ustified by circumstances even if the company has no assets or no assets will be available after paying liabilities. 7. Po/e&) o* 2he Co'&2 6*2e& +6C0n1 /0n(0n1 ', o&(e& POWER TO SETTLE LIST O CONTRI<UTORIES Po/e& 2o )e22-e -0)2) : The Court has the power to settle the list of contributories. L0)2) o* "on2&0;'2o&0e) (a) K:ist -2 Contributories contains the names of present members. (b) K:ist A2 Contributories contains the names of past members* i.e.* members who ceased to be members within preceding year. L0)2 (0),en)e( /02h : The Court has the discretion to dispense with the settlement of list of contributories if it is satisfied that it is not necessary to ma$e calls or ad#ust the rights of the contributories. Re"20*. &e10)2e& o* +e+;e&) : The Court has the power to rectify the register of members. Po/e& 2o &e6-0)e 6))e2) : The Court has the power to realise the assets and apply the sale proceeds in payment of liabilities. MAKE CALLS Po/e& /02h /ho+5 The Court has the power to ma$e calls. /owever* the :i+uidator may also ma$e calls* if so authorised by the Court. Se2 o** 6160n)2 "6--) : - member* who is a creditor of the company* cannot set off his debt against any liability for calls. A,,-0"620on o* )'&,-') : The surplus arising on winding up shall be utilised in (a) ad#ustment of rights of contributories amongst themselves; and (b) distribution amongst the contributories. -0-

KNOWLEDGE ACADEMY
Phone : X Y Z

Po/e& 2o e4"-'(e "&e(02o&) : The Court may fi" the time within which the debts must be proved. If a creditor fails to prove his debt within the time fi"ed by the Court* such creditor shall be e"cluded. De2e&+0ne ,&0o&02. o* "o)2) : If the assets realised are insufficient to satisfy whole cost* charges and e"penses incurred in winding up* the Court shall determine the order of priority inter se. S26. /0n(0n1 ', The Court has the discretion to stay the winding up. The stay may be granted on such terms and conditions as the Court deems fit. D0))o-'20on : The Court has the power to order dissolution of the company as per ,ec. 41 . De"-6&e 2he (0))o-'20on @o0( : The Court has the power to declare dissolution as void as per ,ec. ''=.

A.

CONSEFUENCES O WINDING UP ORDER !SEC. ### TO ##A%

DISCHARGE O O ICERS AND EMPLOYEES Gene&6- &'-e : -ll the employees and officers of the company shall be discharged. E4"e,20on : The officers and employees shall continue in office if the business of the company is continued by the li+uidator for beneficial winding up* with the sanction of the Court. Ce))620on o* ,o/e&) o* <o6&( : -ll the powers of the Aoard shall cease. These powers shall become e"ercisable by the @fficial :i+uidator. STAY O SUITS OR PROCEEDINGS Gene&6- &'-e : -ny suit pending in any Court (other than a suit pending in ,C or /C) shall be stayed. Ho new suit shall be commenced against the company. E4"e,20on : The Court may allow a pending suit to be continued* or that a new suit may be commenced. ='&0)(0"20on o* Co'&2 The Court shall have the #urisdiction to dispose of all suits and proceedings. -ll suits pending in any Court (other than a suit pending in ,C or /C) shall be transferred to the Court. L0>'0(62o& : The @fficial :i+uidator shall become the li+uidator of the company. B. POWERS O THE LIFUIDATOR !Se". #9A% 1. POWERS EXERCISA<LE WITH THE SANCTION O THE COURT Le16- ,&o"ee(0n1) % The li+uidator has the power to institute or defend any legal proceedings on behalf of the company. C6&&. on ;')0ne)) % The li+uidator has the power to carry on the business of the company so far as may be necessary for the beneficial winding up of the company. Se-- P&o,e&2. % The li+uidator has the power to sell the property of the company.

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KNOWLEDGE ACADEMY
Phone : X Y Z

Ch6&1e 6))e2) % The li+uidator has the power to raise money by charging the assets of the company. O2he& ,o/e&) : The li+uidator has the power to do all such things as may be necessary for winding up and distributing the assets. One&o') ,&o,e&2. : The li+uidator has the power to disclaim onerous property. 7. POWERS EXERCISA<LE WITHOUT THE SANCTION O THE COURT A"20n1 on ;eh6-* o* 2he "o+,6n. : The li+uidator has the power to do all acts and to e"ecute all documents on behalf of the company. Ne1o206;-e In)2&'+en2) : The li+uidator has the power to draw* accept* ma$e and endorse negotiable instruments on behalf of the company. Co+,6n.I) )e6- : The li+uidator has the power to use the company2s seal. A,,o0n2 6n 61en2 : The li+uidator has the power to appoint an agent to do any business which he is unable to do himself. In),e"20on : The li+uidator has the power to inspect the records and returns of the company* without payment of any fee* filed with registrar. Con2&0;'2o&. ;e"o+e) 0n)o-@en2 : The li+uidator has the power to prove* ran$ and claim in the insolvency of any contributory* and to receive dividends in the insolvency. Con2&0;'2o&. (0e) : The li+uidator has the power to obtain payment from estate of a deceased contributory.

?. POWER O !Se". 9$9%

LIFUIDATOR TO DISCLAIM ONEROUS PROPERTY

REFUIREMENTS O A GALID DISCLAIMER T0+e -0+02 *o& (0)"-60+e& : The li+uidator may disclaim any onerous property within 3 months of commencement of winding up. S01ne( : The disclaimer shall be in writing and signed by the li+uidator. S6n"20on o* 2he Co'&2 : The Court has the discretion to grant sanction to the li+uidator to disclaim the onerous property. No20"e : Aefore granting the sanction* the Court may re+uire that noticeL be given to the persons interested. E ECT O DISCLAIMER E**e"2 on 2he "o+,6n. : The company shall be relieved of all its liabilities in respect of such property. E**e"2 on 2he o2he& ,6&2. : The Court may award damages to the other party for nonperformance of contract. ,uch party shall have a right to claim the damages in winding up.

10.

DUTIES O THE LIFUIDATOR

Con('"2 /0n(0n1 ', ,&o"ee(0n1) The li+uidator shall conduct the winding up proceedings. /e shall perform such duties as the Court may impose. No2 2o +6Ce )e"&e2 ,&o*02 The li+uidator occupies a fiduciary position. /e must not ma$e any secret profit. -1-

KNOWLEDGE ACADEMY
Phone : X Y Z

PRELIMINARY REPORT M6n(62o&. % It is mandatory for the li+uidator to submit a preliminary report to the Court. T0+e -0+02 : The preliminary report shall be submitted within 0 months of the winding up order. Con2en2) (a) The capital of the company (b) 6stimated amount of assets of the company (c) 6stimated amount of liabilities of the company (d) Causes of failure of the company* if the company has failed (e) 5hether any further in+uiry is desirable. URTHER REPORT O,20on6 The li+uidator is not bound to furnish the further report. There is no time limit for furnishing the further report. Con2en2) (a) The particulars relating to promotion and formation of the company. (b) 5hether any fraud was committed in the promotion or formation of the company. (c) 5hether any fraud was committed in the company. (d) -ny other matter as the li+uidator deems fit. C')2o(. o* "o+,6n.I) ,&o,e&2. The li+uidator shall ta$e into his custody all the properties of the company. Mor this purpose* such steps may be ta$en and such force may be used as is necessary in the given circumstances. M60n2en6n"e o* ;ooC) (a) The li+uidator shall maintain proper boo$s of account and other records. (b) /e shall maintain minutes boo$ of meetings of creditors and contributories. 11. COMMITTEE O INSPECTION UNDER COMPULSORY WINDING UP !Se". #8# 6n( #89% A,,o0n2+en2 0) no2 +6n(62o&. The appointment of committee of inspection is not mandatory. The committee of inspection shall not be appointed unless the Court is satisfied that such appointment is necessary. M6nne& o* 6,,o0n2+en2 - meeting of creditors shall be held. The meeting shall determine the members of the committee. - meeting of contributories shall be held after the meeting of creditors is held. The meeting may accept the decision of the creditors2 meeting with or without modifications or may re#ect it. 5here the meeting of contributories does not accept the decision of the creditors2 meeting in its entirety* the li+uidator shall apply to the Court for directions. Then* the Court shall determine the composition of the committee. Re+'ne&620on : Ho remuneration is payable to the members of the committee. -=-

KNOWLEDGE ACADEMY
Phone : X Y Z

Co+,o)020on o* "o++022ee : The committee shall consist of not more than 3 members. PROGISIONS APPLICA<LE TO COMMITTEE O INSPECTION !WHETHER APPOINTED UNDER COMPULSORY WINDING UP OR UNDER CREDITORSI GOLUNTARY WINDING UP% Mee20n1) o* "o++022ee % The meetings of committee shall be held at such time as may be determined by the committee; or the li+uidator; or any member of the committee. M6nne& o* 26C0n1 (e"0)0on) : The decisions of the committee shall be ta$en by the ma#ority of members present and voting. F'o&'+ : The +uorum of a committee shall be higher of >)rd of total number of members; or 3 members. Ce))620on o* +e+;e&)h0, : - person shall cease to be a member of the committee in the following ways% &esignation Insolvency Compounding or arrangement with creditors.

17.

STATEMENT O A !Se". #9#%

AIRS TO <E MADE TO LIFUIDATOR

When 0) )';+0))0on &e>'0&e(5 : The statement of affairs shall be submitted within 3 days of order of winding up. Who)e ('2. 0) 2o )';+02 2he )262e+en2 o* 6**60&)5 The statement of affairs shall be submitted and verified by one or more persons who were directors* managers* secretary or other chief officer of the company. The statement of affairs shall be submitted to the @fficial :i+uidator. Con2en2) o* )262e+en2 o* 6**60&) The assets of the company The debts and liabilities of the company The names* residences and occupations of its creditors The names* residences and occupations of the debtors

,uch further particulars as the @fficial :i+uidator may re+uire. Co)2 o* ,&e,6&0n1 2he )262e+en2 - person preparing the statement of affairs shall be entitled to recover the costs and e"penses incurred in such preparation. ,uch payment shall be made by the @fficial :i+uidator or the provisional li+uidator.

1$.

GROUNDS OR GOLUNTARY WINDING UP !Se". #B# 2o #BA%

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KNOWLEDGE ACADEMY
Phone : X Y Z

Co+,-e20on o* ('&620on o* 2he "o+,6n. The articles specify the duration after which the company shall be wound up. ,uch duration is completed. The company has passed an ordinary resolution for voluntary winding up. O""'&&en"e o* e@en2 ),e"0*0e( 0n 2he 6&20"-e) The articles specify an event on the occurrence of which the company shall be wound up. ,uch an event has occurred. The company has passed an ordinary resolution for voluntary winding up. On 6n. 1&o'n( : The company passes a special resolution for winding up. 1#. DECLARATION O SOLGENCY !Se". #BB% LEGAL REFUIREMENTS M6(e ;. /ho+5 : The declaration shall be made by a ma#ority of directors. Ge&0*0"620on : The declaration shall be verified by an affidavit. N62'&e o* (e"-6&620on : The directors shall state that the company has no debts; or the company will be able to pay its debts in full within the period specified in declaration (not being more than ) years) W&on1 (e"-6&620on Con)e>'en"e) - director who has no reasonable ground for his opinion that the company will be able to pay its debts in full within the period specified in the declaration* shall be punishable with imprisonment upto 0 months or fine upto &s. '(*((( or both. If the debts are not paid in full within the period specified in the declaration* it shall be presumed that the directors ma$ing the declaration did not have any reasonable ground for the opinion.

19.

MEM<ERSI GOLUNTARY WINDING UP !Se". #?0 2o #?B%

Me6n0n1 o* J+e+;e&) @o-'n26&. /0n(0n1 ',I : 5here a declaration of solvency is made* the winding up proceedings remain in the control of the members. This $ind of voluntary winding up is called as Kmembers2 voluntary winding up2. A,,o0n2+en2 o* -0>'0(62o& :i+uidator shall be appointed by the members. - body corporate shall not be appointed as li+uidator. &emuneration of li+uidator shall be fi"ed by members. :i+uidator shall not ta$e charge of his office until his remuneration is fi"ed.

&emuneration once fi"ed cannot be increased. G6"6n". 0n 2he o**0"e o* L0>'0(62o& : -ny vacancy arising in the office of the li+uidator shall be filled by the company in .<. Ce))620on o* ,o/e&) o* 2he <o6&( : Cowers of Aoard* <D and manager come to an end.

KNOWLEDGE ACADEMY
Phone : X Y Z

D'2. o* -0>'0(62o& 0n "6)e o* 0n)o-@en". : In the following 3 cases the li+uidator shall call a meeting of the creditors* and thereafter proceed as if it is creditor2s voluntary winding up% (a) 5here the li+uidator forms an opinion that the company will not be able to pay its debts in full within the period specified in the declaration of solvency. (b) 5here the period specified in the declaration of solvency has e"pired without the debts having been paid in full. 0n6- +ee20n1 6n( (0))o-'20on (a) (b) (c) (d) The li+uidator shall lay the final account and hold a final meeting as soon as affairs are fully wound up. -fter laying the final account in .<* the li+uidator shall send the final account to the &egistrar and official li+uidator. The official li+uidator shall scrutinise the final account. The Court shall ma$e an order of dissolution if the official li+uidator ma$es a report to the Court that the affairs of the company have not been conducted pre#udicial to the interests of the members or to public interest.

18.

CREDITORSI GOLUNTARY WINDING UP !Se". #?? 2o 90?%

A,,o0n2+en2 o* -0>'0(62o& (a) The li+uidator shall be nominated by the members (b) The li+uidator shall also be nominated by the creditors (c) The person nominated by the creditors shall be the li+uidator* in case the creditors and members nominate different persons as li+uidator. G6"6n". 0n o**0"e o* -0>'0(62o& : -ny vacancy arising in the office of li+uidator shall be filled by the creditors. Re+'ne&620on o* -0>'0(62o& : The remuneration of li+uidator shall be fi"ed by the creditors.

1A. APPOINTMENT O COMMITTEE O INSPECTION CREDITORSI GOLUNTARY WINDING UP !Se". 90$%

UNDER

Po/e& o* 6,,o0n2+en2 : The creditors have a discretionary power to appoint committee of inspection. M6nne& o* 6,,o0n2+en2 The creditors may nominate a ma"imum of ' members. -fter nomination has been made by the creditors* the members may nominate a ma"imum of ' members. C&e(02o&)I &01h2) : The creditors may ob#ect to the nominees of members. In such a case* the nominees of members shall not act as members of the committee. Co'&2I 0n2e&@en20on % @n any application made to the Court for directions* the Court may intervene. Po/e&) o* 2he Co'&2 % The Court may appoint any person to act as member of the committee.

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KNOWLEDGE ACADEMY
Phone : X Y Z

1B. GOLUNTARY WINDING UP SU<=ECT TO SUPERGISION O COURT !Se". 977 2o 97A%

When o&(e&e(5 : -t anytime after a company has passed a resolution for voluntary winding up* the Court may ma$e an order that the voluntary winding up shall continue* but sub#ect to the supervision of Court. Po)020on o* -0>'0(62o& 6,,o0n2e( 0n @o-'n26&. /0n(0n1 ', /e shall continue. /e may e"ercise all his powers without re+uiring any sanction of the Court (as if the company were being wound up altogether voluntarily). The Court may restrict some of his powers. Po/e&) o* Co'&2 : The Court shall have all the powers as if it were compulsory winding up. Po/e&) o* 2he Co'&2 &e-620n1 2o -0>'0(62o& The Court is empowered to remove the li+uidator appointed in voluntary winding up. The Court has the power to appoint @fficial :i+uidator as additional li+uidator. The Court may remove any li+uidator* anytime. The Court may fill the vacancy arising in the office of li+uidator.

1?.

DISSOLUTION !Se". #B1%

G&o'n() *o& (0))o-'20on : The Court may order dissolution of the company in the following cases% (a) The affairs of the company have been completely wound up. (b) The Court is satisfied that (i) the li+uidator cannot proceed with the winding up of a company for want of funds and assets; or for any reason whatsoever and (ii) it is #ust and reasonable in the circumstances of the case that an order of dissolution of the company should be made. E**e"20@e (62e o* (0))o-'20on : The company shall be dissolved as from the date of the order of the Court. 70. REGIGAL O A COMPANY !Se". 99?% Po/e& o* 2he Co'&2 : The Court is empowered to order that the order of dissolution is void. E**e"2 o* o&(e& Dissolution shall be void ab initio. -ll conse+uences resulting from the dissolution are avoided. -ll proceedings conducted during the interval between the date of dissolution and the date of declaration of dissolution as void shall not have any legal effect. E**e"20@e (62e o* &e@0@6- : The company shall be revived as from the date of order of Court declaring dissolution as void.

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KNOWLEDGE ACADEMY
Phone : X Y Z

T0+e -0+02 *o& &e@0@6- : The application for revival may be made within 3 years from the date of dissolution of the company.

71.

DE UNCT COMPANIES !Se". 980%

1. INFUIRY <Y REGISTRAR Con(020on *o& +6C0n1 0n>'0&. : The registrar can ma$e an in+uiry only if he has reasonable cause to believe that the company is not carrying on business; or the company has ceased to be in operation. P&o"e('&e % The registrar shall send a letter of in+uiry to the company. 7. Re,-. ;. 2he "o+,6n. : 5ithin month* the company failed to reply to the notice served by the registrar. $. Sho/ "6')e no20"e ;. &e10)2&6& Con(020on *o& 0))'e o* no20"e : 5ithin month* the company is re+uired to reply to the notice served by registrar. P&o"e('&e % The registrar shall send a registered letter referring to earlier letter #. Re,-. ;. 2he "o+,6n. : 5ithin month* the company is re+uired to show cause to the registrar. 9. PU<LICATION O REGISTRARIS NOTICE IN THE O ICIAL GAZETTE Con(020on3o& ,';-0"620on : 5ithin month* the company failed to show cause to the registrar. P&o"e('&e The registrar shall publish a notice in the @fficial .a;ette. -lso* a copy of notice shall be served on the company by registered post. The notice shall state that the name of the company shall be struc$ off if it fails to show cause within ) months. - 4-

KNOWLEDGE ACADEMY
Phone : X Y Z

8. Re,-. ;. 2he "o+,6n. : 5ithin ) months* the company is re+uired to show cause to the registrar. A. S2&0C0n1 o** 2he n6+e o* 2he "o+,6n. Con(020on3o& )2&0C0n1 o** : 5ithin ) months* the company failed to show cause to the registrar. P&o"e('&e : The registrar shall publish a notice in the official .a;ette. Mrom the date of such publication* the company shall be deemed to be dissolved. B. CONSEFUENCES O STRIKING O THE NAME O THE COMPANY The "o+,6n. 0) (e*'n"2 : Mrom the date of publication of notice in the @fficial .a;ette* the company shall become defunct. L06;0-02. o* +e+;e&) e2". % The liability of members* directors and manager shall not be affected.

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KNOWLEDGE ACADEMY
Phone : X Y Z

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KNOWLEDGE ACADEMY
Phone : X Y Z

77.

RESTORATION O NAME O THE COMPANY !Se". 980%

T0+e -0+02 *o& +6C0n1 6,,-0"620on : The application shall be made to the Court within 3( years from date of stri$ing off the name of the company. Con(020on) *o& &e)2o&620on : The Court shall not ma$e an order of restoration unless it is satisfied that (a) the company was carrying on business or was in operation at the time of stri$ing off the name; or (b) it is #ust and e+uitable that the name of the company be restored. D0&e"20on) ;. Co'&2 : The Court may give such directions as it deems fit for the purpose of placing the company and all other persons in the same position as nearly as may be. as if the name of the company had not been struc$ off. E**e"2) o* &e)2o&620on : The company* creditors* debtors and members shall go bac$ to the position in which they were before the date on which the name of the company was struc$ off.

7$.

ORDER O PAYMENT O LIA<ILITIES !Se". 97?A 6n( 9$0%

OGERRIDING PRE ERENTIAL PAYMENTS !SEC. 97?A% N62'&e o* ,6.+en2) : Mollowing dues shall be treated as over-riding preferential payments% (a) 5or$men2s dues consisting of the following% 5ages* salaries* commission due to wor$men -ccrued holiday remuneration due to wor$men Compensation due to wor$men

,ums due from a provident or pension or gratuity or any other fund for the welfare of wor$men (b) ,ecured debts Le16- e**e"2 These debts shall be paid in full. /owever* if the assets are insufficient to pay these debts in full* these debts shall be paid proportionately. PRE ERENTIAL PAYMENTS !SEC. 9$0% N62'&e o* ,6.+en2) (a) 5ages* salaries* commission due to employees of the company during the period not e"ceeding 4 months within preceding 3 months. /owever* such amount shall not e"ceed &s. 3(*((( in case of each employee. (b) -ccrued holiday remuneration due to employees2 (c) Compensation due to employees (d) ,ums due from a provident or pension or gratuity or any other fund for the welfare of employees (e) &evenues* ta"es* cesses and rates due to C.* ,. or local authority due within preceding 3 months. (f) Investigation e"penses due to C.. Le16- e**e"2 % These unsecured debts shall be paid in priority to other unsecured debts. - ?-

KNOWLEDGE ACADEMY
Phone : X Y Z

P6.+en2 o* -06;0-020e) - O&(e& o* ,&0o&02. (a) @verriding preferential payments u>s '3=(b) Costs and e"penses of winding up (c) Creferential payments u>s ')( (d) Creditors secured by a floating charge (e) Nnsecured creditors PRACTICAL PRO<LEMS ROM CA EXAMINATIONS Ho/ "6)h 0) 2o ;e (0)2&0;'2e( 2o/6&() ,6.+en2 o* @6&0o') -06;0-020e)5 !Se".97?A% !M6. 700$% ( ) <>s. ,unset Construction :imited is being wound by the Court. The @fficial :i+uidator after realisation of the assets has an amount of &s. 31*((*((( at his disposal towards payment to the creditors of the company. The list of creditors is given below% R). (i) Dues to secured creditors 3(*((*((( (ii) Dues to wor$ers '*((*((( (iii) Ta"es* etc* payable to the government authorities 3*((*((( (iv) Nnsecured creditors 4(*((*((( ,ince the available amount is insufficient to meet the claims of all the creditors* e"plain the procedure to be followed for payment of dues as provided in the Companies -ct* ='0* assuming that the company has created a charge on all the assets of the company in favour of the secured creditors. An). R). $9 -6Ch) : is the amount of overriding preferential payments R). 7B -6Ch) 2o ;e ,60( ,&o,o&20on62e-. : to secured creditors (&s. 0 la$hs) and wor$ers2 dues (&s. 3 la$hs). No ,6.+en2) )h6-- ;e +6(e % towards ta"es and duties payable to the .overnment authorities and unsecured creditors. !M6. 700$% M6. 700$ Ho/ "6)h 0) 2o ;e (0)2&0;'2e( 2o/6&() ,6.+en2 o* @6&0o') -06;0-020e)5 !Se".97?A% ( ) <>s 789 limited is being wound up by the Court. The @fficial :i+uidator after realisation of the assets has an amount of &s. '0*((*((( at his disposal towards payment of creditors of the company. Details of creditors are as under% (i) Dues to secured creditors &s. 4(*((*((( (ii) Dues to wor$ers &s. )(*((*((( (iii) Ta"es and duties payable to .overnment authorities &s. 4*((*((( (iv) Nnsecured creditors &s. 1(*((*((( ,ince the available amount is insufficient to meet the claims of all the creditors* e"plain the procedure to be followed for payment of dues as provided in the% Companies -ct* ='0* assuming that the company has created a charge on all the assets of the company in favour of the secured creditors. An).

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KNOWLEDGE ACADEMY
Phone : X Y Z

R). A0 -6Ch) % is the amount of overriding preferential payments (&s. 4( la$hs due to secured creditors and &s. )( la$hs dues to wor$ers) R). 98 -6Ch) 2o ;e ,60( ,&o,o&20on62e-. : to secured creditors (&s. )3 la$hs) and wor$ers2 dues (&s. 34 la$hs). No ,6.+en2) )h6-- ;e +6(e % towards ta"es and duties payable to the .overnment authorities and unsecured creditors. !No@. 700?% Ho/ "6)h 0) 2o ;e (0)2&0;'2e( 2o/6&() ,6.+en2 o* @6&0o') -06;0-020e)5 !Se". 97?A% ( ) <>s. &aman :td. was wound up by the Court. The official li+uidator invited claims from its creditors which stood as under% Income ta" dues% &s. la$hs ,ales ta" dues% &s. ' la$hs Dues of 5or$ers% &s. 3' la$hs Nnsecured loans payable to directors% &s. 3' la$hs Trade creditors who supplied raw material% &s. ' la$hs ,ecured creditor being the ban$ers of the company% &s. ?' la$hs -----------------&s. '0 la$hs OOOOOOOOOO @fficial :i+uidator could realise only &s. 1( la$hs by sale of assets and realisations made from the company2s debtors* which is not sufficient to pay to all the creditors. Clease decide the order of priority for payment to creditors e"plaining the relevant provisions of the Companies -ct* ='0. An). R). 100 -6Ch) % is the amount of overriding preferential payments (&s. ?' la$hs due to secured creditors and &s. 3' la$hs dues to wor$ers) R). B0 -6Ch) 2o ;e ,60( ,&o,o&20on62e-. : to secured creditors (&s. 0( la$hs) and wor$ers2 dues (&s. 3( la$hs). No ,6.+en2) )h6-- ;e +6(e % to the .overnment authorities for income ta" dues* sales ta" dues* unsecured loans payable to directors or to trade creditors who supplied raw material. !No@.700B% Ho/ "6)h 0) 2o ;e (0)2&0;'2e( 2o/6&() ,6.+en2 o* @6&0o') -06;0-020e)5 !Se".97?A% ( ) <ars India :imited* a company incorporated under the Companies -ct* ='0 is being wound up by the Court. -fter realisation of the assets of the company* the official li+uidator has an amount of &s. ?(*((*((( at his disposal towards payment of creditors of the said company. The details of creditors are as follows% (i) Nnsecured creditors '(*((*((( (ii) Ta"es and duties payable to .overnment '*((*((( (iii) Dues to wor$ers )(*((*((( (iv) Dues to secured creditors 4(*((*((( The available amount with the li+uidator* obviously* is not sufficient to meet the claims of all the creditors. <oreover* the company had already created a charge on all the assets - =-

KNOWLEDGE ACADEMY
Phone : X Y Z

of the company in favour of the secured creditors. 6"plain the procedure to be followed by the li+uidator for payment of dues as provided in the Companies -ct* ='0. An). R). A0 -6Ch) % is the amount of overriding preferential payments (&s. 4( la$hs due to secured creditors and &s. )( la$hs dues to wor$ers) Se"'&e( "&e(02o&) 6n( ('e) 2o /o&Ce&) )h6-- ;e ,60( 0n *'-- % since the amount realised by realisation of assets (vi;. &s. ?() la$hs is sufficient to pay in full the overriding preferential payments (&s. 4( la$hs due to secured creditors and &s. )( la$hs dues to wor$ers). No ,6.+en2) )h6-- ;e +6(e % to the .overnment authorities for ta" and duties due or to unsecured creditors. !No@.7007% Ho/ "6)h I) 2o ;e (0)2&0;'2e( 2o/6&() o@e&&0(0n1 ,&e*e&en206,6.+en2) 5 !Se". 97?A% (3) The @fficial :i+uidator of the Aogus :imited (in li+uidation) has realised '( la$hs by selling the land owned by the company. The company owes &s. crore to its ban$ers towards a loan secured by the company2s land and factory buildings. The ban$ has claimed that the amount realised by sale of land must be paid in full to it in preference to the Kwor$men2s dues2 to the e"tent of &s. 3' la$hs. 6"amine the ban$2s claim with reference to the relevant provisions of the Companies -ct* ='0. An). R). 179 -6Ch) : is the amount of overriding preferential payments. R). 90 -6Ch) 2o ;e ,60( ,&o,o&20on62e-. : to Aan$ as a secured creditor (&s. 4( la$hs) and wor$men2s dues (&s. ( la$hs). The "-60+ o* 2he ;6nC 0) no2 @6-0( : ,ince the claim of the Aan$ ran$s pari-passu with wor$men2s dues* and therefore* the Aan$ is entitled only to receive &s.4( la$hs out of &s.'( la$hs realised by the sale of assets charged in the favour of the Aan$. !M6. 700B: No@. 7009% Whe2he& 6 (e"&ee ho-(e& "6n "-60+ ,&0o&02. o@e& /o&C+en ('e) 6n( )e"'&e( "&e(02o&) !Se". 97?A% ()) @.C :td. was a supplier of raw material to ,-< :td.* which could not ma$e payment to @.C :td. owing to huge losses and financial constraints. Nltimately* ,-< :td. went into li+uidation and @fficial :i+uidator was appointed. @.C :td. filed a suit for recovery of its dues. The Court awarded a decree in favour of @.C :td. -rmed with the Court2s decree* @.C :td. approached the @fficial :i+uidator to pay the amount to it in preference over dues of the wor$men. The wor$men protested the demand of @.C :td. and contended that their dues ran$ pari passu with the secured creditors and will override all other claims of other creditors even where a decree has been passed. 8ou are re+uired to ascertain the validity of the argument of the wor$men in the light of the provisions of the Companies -ct* ='0 and the decided cases on the sub#ect. An). Co'&2 (e"&ee (oe) no2 +6Ce 6n 'n)e"'&e( "&e(02o& )e"'&e( : as per the decision in -nanta <ills :td. v City Deputy Collector* -hmedabad. Con2en20on o* /o&C+en 0) "o&&e"2 : so the payment to @.C :td. cannot be made until the claims of the wor$men are fully satisfied (,ec. '3=-). - 3( -

KNOWLEDGE ACADEMY
Phone : X Y Z

7#. CONTRI<UTORY !Se". #7B 6n( #8A% Me6n0n1 !Se". #7B% Contributory means every person liable to contribute to assets of the company in the event of winding up of the company. Contributory includes (a) a holder of fully paid up shares; and (b) an alleged contributory (until final determination of person liable as a contributory). SETTLEMENT O LIST O CONTRI<UTORIES !SEC. #8A% Po/e& 2o )e22-e -0)2) : The Court has the power to settle the list of contributories. L0)2) o* "on2&0;'2o&0e) : (a) K:ist -2 Contributories contains the names of present members (b) K:ist A2 Contributories contains the names of past members* i.e.* members who ceased to be members within preceding year. L0)2 (0),en)e( /02h : The Court has the discretion to dispense with the settlement of list of contributories if it is satisfied that it is not necessary to ma$e calls or ad#ust the rights of the contributories. NATURE O LIA<ILITY O A CONTRI<UTORY A;)o-'2e -06;0-02. /is liability is created by law* not because of a contract. /owever* the call becomes payable only when a call is made by the Court or the li+uidator. Po/e&) o* 2he Co'&2 : The Court has the power to rectify the register of members. PERSONS LIA<LE AS CONTRI<UTORIES P&e)en2 +e+;e&) : The liability of present member to pay calls is primary and unconditional. P6)2 +e+;e&) (a) - past member shall be liable if the present member fails to pay the calls. (b) /owever* he shall not be liable for any debt* if more than year has elapsed after he ceased to be a member. for debts contracted after he ceased to be a member. Le16- &e,&e)en2620@e : If a member dies* his legal representative shall be liable as a contributory. O**0"06- 6))01nee : If a member becomes insolvent* his official assignee > official receiver shall be contributory. L0>'0(62o& o* 6 ;o(. "o&,o&62e : If a body corporate* which is a member of the company* is in winding up* its li+uidator shall be liable as contributory. No &01h2 o* )e2 o** : - contributory* who is also a creditor of the company* cannot set off his debt against any liability for calls. PRACTICAL PRO<LEMS ROM CA EXAMINATIONS

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KNOWLEDGE ACADEMY
Phone : X Y Z

!M6. 7000: No@. 7007% When "6n 6 ,6)2 +e+;e& ;e he-( -06;-e 6) 6 "on2&0;'2o&.5 !Se". #8A% ( ) <>s. 789 :imited was wound up with effect from '.).3((( by an order of the Court. <r. -* who ceased to be a member of the company from .0. ===* has received a notice from the li+uidator that he should deposit a sum of &s. '*((( as his contribution towards the liability on the shares previously held by him. In this conte"t e"plain whether <r. - can be called a contributory and whether he can be made liable and whether there is any limitation on his liability. !CA ! 0n6-0 M6. 7000% OR Ay an order of the Court <>s -AC :imited was wound up with effect from '-)3((3. <r. .upta* who ceased to be a member of the company from -0-3(( received a notice from the li+uidator to deposit a sum of &s. '*((( as his contribution towards the liability on the shares previously held by him. <r. .upta see$s your opinion about his liability. !CA ! 0n6-% No@. 7007% An). M&. A 6n( M&. G',26 6&e ,6)2 +e+;e&) : since as on the date of commencement of winding up* year has not elapsed since they ceased to be the members. The. 6&e -06;-e 2o ,6. 'n,60( "6--) : provided the present members are unable to pay the unpaid calls.

79.

RAUDULENT PRE ERENCE TO <E INGALID !Se". 9$1%

Me6n0n1 6n( e))en206-) o* *&6'('-en2 ,&e*e&en"e : - transaction shall be deemed to be a fraudulent preference if all the following conditions are satisfied% (a) The transaction relates to transfer of property* delivery of goods* payment of money or other act relating to the property of the company. (b) It was an entirely voluntary act and not made under any pressure. (c) The dominant motive was to give a creditor a preference over other creditors. Le16- e**e"2 : - fraudulent preference is invalid if it had ta$en place within 0 months of commencement of winding up. PRACTICAL PRO<LEMS ROM CA EXAMINATIONS !M6. 7009% P-6n2 +o&2161e( 0n *6@o'& o* 6 "&e(02o& /02ho'2 6n. "on)0(e&620on K Con)e>'en"e) !Se". 9$1% ( ) <>s. :<H :imited has been running in losses and has defaulted payment to its creditors. @n .1.3((4* the company mortgaged its plant and machinery to <r. Catel* a close friend of the managing director of the company* against payment of his dues of &s. ( la$hs payable by the company. The other creditors were left in lurch. In the meantime* <r. &aman (who was not paid by the company for supply of raw material of the value of &s. '(*((() presented a petition for winding up the company before the /igh Court on ) . 3.3((4. The company was ordered to be wound up by the court on )(.4.3(('. The @fficial :i+uidator wants to declare the transaction of mortgage with <r. Catel as invalid. 5ill he succeedB An).

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KNOWLEDGE ACADEMY
Phone : X Y Z

W0n(0n1 ', h6) "o++en"e( *&o+ $1.17.700# : since order of winding up relates bac$ to the date of presentation of petition. Mo&2161e "&e62e( In *6@o'& o* M&. P62e- 0) In@6-0( : since it amounts to fraudulent preference* because the dominant motive behind the transaction was to give <r. Catel some preference over the other creditors; and it too$ place within 0 months before the commencement of the winding up of the company.

78.

GOLUNTARY TRANS ER GOID AGAINST LIFUIDATOR !Se". 9$1A%

Me6n0n1 6n( e))en206-) : -ny property or goods of the company delivered within preceding 3 months of commencement of winding up shall be void. E4"e,20on) (a) - transaction in the ordinary course of business shall be valid. (b) - transaction entered by a person in good faith and for valuable consideration shall not be void.

7A.

LOATING CHARGE TO <E INGALID !Se". 9$#%

Con(020on : -ny floating charge created within preceding 3 months of commencement of winding up shall be void. E4"e,20on) (a) - floating charge shall be valid if the company was solvent immediately after creation of the charge. (b) - floating charge shall be valid to the e"tent of cash paid to the company as a consideration for the charge. In addition* interest P 'Q p.a. is also allowed. PRACTICAL PRO<LEMS ROM CA EXAMINATIONS A(@6n"e o* R). 10 -6Ch) ;. 6 ;6nC )';)e>'en2 2o 2he "&e620on o* 6 *-o620n1 "h6&1e - Whe2he& 2he *-o620n1 "h6&1e I) In@6-0(5 !Se". 9$#% !M6. 700#% ( ) - company created a floating charge of its current assets in favour of a ban$ to secure a current account* which was in debit of &s. ' la$hs and also to secure further wor$ing Capital facilities provided by the ban$. The charge created on st Danuary* 3(() was duly registered with the &egistrar of Companies. The ban$ advanced &s. ( la$hs subse+uent to the creation of charge. The company has gone into voluntary li+uidation pursuant to a resolution passed on st ,eptember* 3((). 6"amine the validity of the floating charge in case it is a creditors2 voluntary winding up* but there is no fraudulent preference. 5ould your answer be different* if it was a member2s voluntary winding upB An). -o620n1 "h6&1e I) @6-0( 2o 2he e42en2 o* &s. ( la$hs; 6n( interest at the rate of 'Q per annum. S6+e 6n)/e& In "6)e o* +e+;e&)I @o-'n26&. /0n(0n1 ', : since ,ec. ')4 applies to every mode of winding up. - 3) -

KNOWLEDGE ACADEMY
Phone : X Y Z

Whe2he& 6 *-o620n1 "h6&1e 6+o'n20n1 2o R). 79 -6Ch) "&e62e( 6) "on)0(e&620on o* "6)h ,6.+en2 o* R). 19 -6Ch) 0) @6-0(5 !Se". 9$#% !M6. 7008% (3) Imprudent Company :imited approached ,afe Minance Company :imited for loan of &s. 3( :a$hs to finance purchase of some essential machinery. The company created a floating charge on some of its assets on st December* 3((4 for &s. 3' la$hs to secure &s. ' la$hs already due to ,afe Minance Company :imited and additional amount to be advanced by the said Minance company. ,afe Minance Company :imited advanced &s. ' la$hs on 'th December* 3((4 towards purchase of certain machinery. ,ome of the creditors filed winding up petition in the Court on st Danuary* 3((' on the ground that the company was unable to pay its debts and the company was ordered to be wound up on 'th December* 3(('. 6"amine with reference to the provisions of the companies -ct* ='0 whether the floating charge is valid. An). D62e o* "o++en"e+en2 o* /0n(0n1 ', : st Danuary* 3((' (being the date of filing of winding up petition) D62e o* o&(e& o* /0n(0n1 ', : 'th December* 3((' D62e o* "&e620on o* *-o620n1 "h6&1e : st December* 3((4 Se". 9$# 0) 622&6"2e( : since floating charge is created within preceding 3 months of commencement of winding up. A+o'n2 o* *-o620n1 "h6&1e @6-0( % Mloating charge upto &s. ' la$hs alongwith interest 'Q p.a. or such other rate as may be notified by C. in the @fficial .a;ette. A+o'n2 o* *-o620n1 "h6&1e @o0( % (a) Mloating charge for &s. ' la$hs not yet advanced by ,afe Minance Company :imited is void. (b) Mloating charge for &s. ' la$hs already due to ,afe Minance Company :imited is void since the amount of &s. ' la$hs was not advanced in reliance upon a promise to create floating charge. Con)e>'en"e) /he&e ,&o,e&20e) o* 2he "o+,6n. 6&e )o-( 62 1&o)) 'n(e&@6-'e 2o 6 ,&0@62e "o+,6n. 0n /h0"h )on o* MD 0) 0n2e&e)2e(: 6n( *-o620n1 "h6&1e 0) "&e62e( on "'&&en2 6))e2)5 !Se". 9$1A 6n( 9$#% !No@. 700A% ()) <>s Info-tech @vertrading :td. was ordered to be wound up compulsorily by an order dated 'th @ctober* 3((? of the Delhi /igh Court. The official li+uidator who has ta$en control of the assets and other records of the company has noticed the following% (i) The <anaging Director of the company has sold certain properties belonging to the company to a private company in which his son was interested causing loss to the company to the e"tent of &s. '( la$hs. The sale too$ place on (th <ay* 3((?. (ii) The company created a floating charge on st Danuary* 3((? in favour of a private ban$ for the overdraft facility to the e"tent of &s. ' crores* by hypothecating the current assets vi;.* stoc$s and boo$ debts. 6"amine what action the official li+uidator can ta$e in this matter having regard to the provisions of the Companies -ct* ='0. An). !0% - 34 -

KNOWLEDGE ACADEMY
Phone : X Y Z

D62e o* "o++en"e+en2 o* /0n(0n1 ', : Hot given. E**e"2 o* @o-'n26&. 2&6n)*e& : -ny voluntary transfer of property within preceding 3 months of commencement of winding up is void (,ec. ') -). S6-e o* ,&o,e&20e) o* 2he "o+,6n. 2o ,&0@62e "o+,6n. In /h0"h )on o* MD 0) In2e&e)2e(: 0) @o0( : since the given transaction attracts ,ec. ') - assuming that such sale was made within preceding 3 months of commencement of winding up. since the given transaction is not entered into in the ordinary course of business since the given transaction is not entered into in good faith and for valuable consideration. An). !00% D62e o* "o++en"e+en2 o* /0n(0n1 ', : Hot given. D62e o* o&(e& o* /0n(0n1 ', : - 'th @ctober* 3((? D62e o* "&e620on o* *-o620n1 "h6&1e : st Danuary* 3((? Se". 9$# 0) 622&6"2e( : assuming that the floating charge was created within preceding 3 months of commencement of winding up. A+o'n2 o* *-o620n1 "h6&1e @6-0( Mloating charge upto &s. ' crores alongwith interest P 'Q p.a. or such other rate as may be notified by C. in the @fficial .a;ette. /owever* if the whole amount of overdraft facility is not utilised by the company* the floating charge shall be valid only upto such amount as is actually advanced by the ban$ to the company plus interest P 'Q p.a. or such other rate as may be notified by C. in the @fficial .a;ette.

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