Directions of Tribunal on Report of Company Liquidator

February 19, 2023

This article has been written by Pallavi Jindal, a student of NEF Law College, Guwahati

INTRODUCTION:

Liquidation means when the business of the company ceases or comes to an end. This is the situation when the company cannot pay its obligations and debts, so it distributes its assets among all the claimants of the company. It is a way to terminate the affairs of the company and realize its assets for the distribution.

The main three types of company liquidation are as follows:

Voluntary Liquidation: When the directors, shareholders etc of the company appoints a liquidator for the liquidation as their company is unable to pay its debts, it is known as voluntary liquidation.
Compulsory Liquidation: When the creditors of the company files a suit in the court of law for the winding up of the company as the company is unable to repay the dues and debts, it is known as compulsory liquidation.
Creditors Voluntary Liquidation: When the company declares insolvency, the directors or owners proceed with the liquidation procedure to avoid the intervention of the court, it is known as creditors voluntary liquidation.

When the company goes into the winding up or liquidation procedure, then a person is appointed as a company liquidator by the court, shareholders or the creditors to sell off the assets of the company. A liquidator is appointed for the distribution of assets among the shareholders and creditors accordingly. He is appointed when there is approval of the majority of creditors of the company.

The duties of the company liquidator are as follows:

They have the responsibility to verify and check the contentions of the creditors of the company regarding the debts.
They need to protect and maintain the property, assets etc.
They need to enquire about the financial affairs of the debtors regarding their transactions.
Carrying on the business of company liquidators for the profitable liquidation.
Preparing the report regarding the corporate debtors according to the prescribed standards.

PROVISIONS REGARDING DIRECTIONS OF TRIBUNAL ON REPORT OF COMPANY LIQUIDATOR (SECTION 282):

(1) The Tribunal shall, on consideration of the report of the Company Liquidator ,fix a time limit within which the entire proceedings shall be completed and the company be dissolved:

Provided that the Tribunal may, if it is of the opinion, at any stage of the proceedings, or on examination of the reports submitted to it by the Company Liquidator and after hearing the Company Liquidator, creditors or contributories or any other interested person, that it will not be advantageous or economical to continue the proceedings, revise the time limit within which the entire proceedings shall be completed and the company be dissolved.

(2) The Tribunal may, on examination of the reports submitted to it by the Company Liquidator and after hearing the Company Liquidator, creditors or contributories or any other interested person, order sale of the company as a going concern or its assets or part thereof:

Provided that the Tribunal may, where it considers fit, appoint a sale committee comprising such creditors, promoters and officers of the company as the Tribunal may decide to assist the Company Liquidator in sale under this sub-section.

(3) Where a report is received from the Company Liquidator or the Central Government or any person that a fraud has been committed in respect of the company, the Tribunal shall, without prejudice to the process of winding up, order for investigation under section 210, and on consideration of the report of such investigation it may pass order and give directions under sections 339 to 342 or direct the Company Liquidator to file a criminal complaint against persons who were involved in the commission of fraud.

(4) The Tribunal may order for taking such steps and measures, as may be necessary, to protect, preserve or enhance the value of the assets of the company.

(5) The Tribunal may pass such other order or give such other directions as it considers fit.

In other words we can say that, after considering the company liquidator’s report, the tribunal will complete the entire proceedings and the company will be dissolved within a fixed time limit. If the tribunal thinks that it is not beneficial to continue the proceedings within the fixed time limit at the stage of the proceeding or during the examination of report, it can revise the fixed time limit for the proceedings and dissolution. The tribunal may order the sale of the company with all of its assets as part of the transaction and if the tribunal thinks fit, it can appoint a committee of creditors, promoters and officers of the company who can help the liquidator in the sale of the company. If there is fraud involved regarding the company, then a tribunal may order for investigation and will pass order according to the investigating report and it may take steps for protecting the assets of the company.

CASES REFERRED:

Indian Textiles And Another vs Gujarat State Financial … on 14 July, 1993: In this case it was held that the liquidator appointed by the tribunal submitted the report directing the gujarat state financial corporation for the possession of finanacial assets of the liquidating company. It was further stated that the liquidator has the power to take the assets of the liquidating company in his possession according to the laws of the country.
State Bank Of India vs Engg. Majdoor Sangh on 2 December, 1999: In this case, the creditors of Beclawat of India Limited filed a petition in the tribunal requesting the company to be wound up as it is not able to repay the debts to its creditors, then the tribunal ordered for winding up as well as appointed an official liquidator for the company who will proceed in this liquidation on behalf of the company.
Official Liquidator Of Amil … vs Unknown on 11 September, 2014: In this case, M/s. Amil Distributors Pvt. Ltd. was being wound up as the petition was filed by a trust, then the court appointed an official liquidator on behalf of the company and took the possession and assets of the company and directed for inspection of the records of the company for the inventory and the company invited the objections from the creditors and other interested persons in case of winding up by publishing it in the newspaper and the liquidator stated in its report that no objections were received by him.

CONCLUSION:

Liquidation means when the business of the company ceases or comes to an end. A liquidator is a person who is appointed on behalf of the company in case of its winding up. It is mandatory to appoint a company liquidator as he distributes the assets of the company to its claimants in a fair and reasonable manner. Under Section 282 of the Companies Act, 2013 the tribunal gives the directions of liquidation according to the reports of the company liquidator and he needs to proceed according to the directions of the tribunal which is an essential provision during the winding up under Companies Act, 2013.

REFERRENCES:

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February 19, 2023