Procedure for Winding Up of a Company by Tribunal By Sarah Bhandari

In this Article we are going to discuss the meaning of winding up under section 2(94A), modes of winding up under section 270, the process of compulsory winding up by Tribunal under section 271(1) who can present the petition of winding up under section (272) and some of the important case laws related to who cannot present the petition of winding up under Companies Act, 2013

Before we jump into the meaning of winding up, provisions made related to winding up and the modes of winding up let’s discussion why a company has to reach at a point wherein it prefers winding up of the business rather than continuing it, in this regard the question arises why and when a corporate collapses?

So, it may occur due to inadequate capital, fraudulent business practices, management inexperience and incompetence, failure to respond to change, recession, obsolescence and excessive gearing etc.

Simplified explanation of winding up of a company is defined as a process by which the life of a Company is brought to an end and its property administered for the benefits of its members and creditors.

Pursuant to section 2(94A) Winding up means winding up under this Act or Liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable

Modes of winding up pursuant to Section 270

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Compulsory winding up (By the Tribunal) As per Companies Act 2013


Voluntary winding up

As per Insolvency and Bankruptcy Code 2016

Insolvency is when an Individual, corporation or other organization cannot meet its financial obligations for paying their debts. It is a situation where the debtor is unable to meet his/her obligations.

Technically, Bankruptcy occurs when a court has determined Insolvency and given legal orders for it to be resolved, it is a determination of Insolvency made by a court of law with resulting legal orders intended to resolve the insolvency. It is a legal scheme in which an insolvent debtor seeks relief.

Process of compulsory winding up by the Tribunal (NCLT)

A Company may be wound up by the Tribunal on following grounds section 271(1)

a)      If the company has by special resolution resolved that the company be wound up by the Tribunal;
b)      If the company has acted against the interests of the sovereignty and integrity of India, the security of the state, friendly relations with foreign States, public order, decency or morality;
c)       If on an application made by the Registrar or any other person authorized by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up;
d)      If the company has made a default in filing with the registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or
e)      If the tribunal is of the opinion that it is just and equitable that the company should be wound up.

Who can present the petition to the Tribunal for the winding up of a Company under section 272 of Companies Act, 2013?

  1. The Company- the Director shall make a petition in the name of the Company by passing special resolution in general meeting. Director may file winding-up petition on behalf of company without permission of general meeting when they find company to be insolvent;
  2. Any contributory or contributories- A contributory shall be entitled to present a petition notwithstanding that he may be the holder of fully paid up shares, or that the company may have no assets at all or may have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities, and shares in respect of which he is a contributory or some of them were either originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up or have devolved on him through the death of a former holder;
  3. The Registrar;
  4. Any person authorized by the Central Government in that behalf; or
  5. In case falling under clause (b) of section 271 (if a company has acted against the interests of the sovereignty and integrity of India, the security of the state, friendly relations with foreign States, public order, decency or morality) by the Central Government or a State Government.

A copy of the petition made under this section shall also be field with the Registrar and the Registrar shall, without prejudice to any other provisions, submit his views to the Tribunal within sixty days of receipt of such petition.

Who cannot present a winding up petition? Following are some of the important case laws in this regard

Case Name

National Textile Workers’ union v. P.R Ramakrishnan


Though the workers have no right to present a winding up petition, the workers may still be entitled to appear and be heard in support of or in opposition to the winding up petition. That would depend upon whether their interest is likely to be affected by any order, which may be made on the winding up petition.
Case Name

Re. Indo French Time Industries Ltd.


An employee who has not been paid his legal or statutory dues cannot be considered as a creditor under the provision of the Company Law. This is in view of the fact that there are special remedies provided by various Labour Laws for recovery of their legal dues from the company.
Case Name

Mumbai Labour Union v. Indo French Time Industries Ltd


A trade union claiming creditors of the company cannot present petition for the winding up of a company. Though they have a right to be heard before any decision is taken by the court in pursuance of an application made by a creditor or contributory of the company.
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