(Part I)|(Part II)|(Part III)|(Part IV)|(Part V)|(Part VI)|(Part VII)|(Part VIII)
Loans to managing agent.
369. Loans to managing agent.-(1) No public company, and no private company which is a subsidiary of a public company, shall make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other 219 person by,- (a) its managing agent or any associate of its managing agent: or (b) any body corporate in respect of which the Central Government, by order, declares that it is satisfied that the Board of directors, managing director, managing agent, secretaries and treasurers or manager thereof is accustomed to act in accordance with the directions or instructions of. the managing agent or associate of the managing agent, notwithstanding that the body corporate may not itself be an associate of the managing agent.
(2) Nothing contained in sub-section (1) or in section 295 shall apply to any credit given by the company to its managing agent for the purpose of facilitating the company’s business and held by such agent in his own name in one or more current acccunts, subject to limits previously approved by the directors of the company and on no account exceeding twenty thousand rupees in the aggregate.
Loans etc., to companies under the same management.
370. Loans etc., to companies under the same management.-(1) No company (hereinafter in this section referred to as “the lending company”) shall- (a) make any loan to, or (b) give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by, any body corporate which is under the same management as the lending company, unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company. Explanation.-For the purposes of this sub-section, two bodies corporate shall be deemed to be under the same management- (i) if the managing agent, secretaries and treasurers, managing director or manager of the one body, or where such managing agent or secretaries and treasurers are a firm, any partner in the firm, or where such managing agent or secretaries and treasurers are a private company, any director of such company, is- (a) the managing agent, secretaries and treasurers, managing director or manager of the other body; or (b) a partner in the firm acting as managing agent or secretaries and treasurers of the other body; or (c) a director of the private company acting as manag- ing agent or secretaries and treasurers of the other body; or (ii) if a majority of the directors of the one body constitute, or at any time within the six months immediately preceding constituted, a majority of the directors of the other body. 220
(2) Nothing contained in sub-section (1) shall apply to any loan made, guarantee given or security provided- (a) by a holding company to its subsidiary; or (b) by the managing agent or secretaries and treasurers to any company under his or their management.
Penalty for contravention of section 369 or 370.
371. Penalty for contravention of section 369 or 370.-(1) Every person who is a party to any contravention of section 369 or 370, including in particular any person to whom the loan is made, or in whose interest the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months: Provided that where any such loan, or any loan in connection with which any such guarantee or security has been given or provided by the lending company, has been repaid in full, no punishment by way of imprisonment shall be imposed under this subsection; and where the loan has been repaid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced.
(2) All persons who are knowingly parties to any such con- travention shall be liable, jointly and severally, to the lending com- pany for the repayment of the loan, or for making good the sum which the lending company may have been called upon to pay in virtue of the guarantee given or the security provided by such company.
Purchase by company of shares, etc., of other companies in same group. 372. Purchase by company of shares, etc., of other companies
in same group.-(1) A company (hereinafter in this section and section 373 referred to as “the investing company”) shall not be entitled to subscribe for, or purchase, the shares or debentures of any body corporate belonging to the same group as the investing company, except to the extent and except in accordance with the restrictions and conditions specified in this section.
(2) The Board of directors of the investing company shall be entitled to invest in any shares or debentures of any other body corporate in the same group up to ten per cent. of the subscribed capital of such other body corporate: Provided that the aggregate of the investments so made by the Board in all other bodies corporate in the same group shall not exceed twenty per cent. of the subscribed capital of the investing company.
(3) The investing company shall not make any investment in the shares or debentures of any other body corporate in the same group, in
excess of the limits specified in sub-section (2) and the proviso thereto, unless the investment is sanctioned by a resolution of the investing company and unless further it is approved by the Central Government.
(4) No investment shall be made by the Board of directors of a
company in pursuance of sub-section (2), unless it is sanctioned by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting, except those not entitled to vote thereon, and unless further notice of the resolution to be 221 moved at the meeting has been given to every director in the manner specified in section 286.
(5) Every company shall keep a register of all investments made by it in shares and debentures of bodies corporate in the same group, snowing, in respect of each investment, the following particulars:- (a) the name of the body corporate in which the investment is made; (b) the date on which the investment is made; and (c) the nature and extent of the investment.
(6) Particulars of every investment to which sub-section (5) applies shall, within three days of the making thereof, be entered in the register aforesaid.
(7) If default is made in complying with the provisions of subsection
(5) or (6), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.
(8) The register aforesaid shall be kept at the registered office of the company, and shall be open to inspection at such office; and extracts may be taken therefrom and copies thereof may be requir- ed, by any member of the company to the same extent, in the same manner, and on payment of the same fees as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly.
(9) Every company shall annex to each balance-sheet prepared by it after the commencement of this Act, a list of the bodies corporate in the same group in the shares or debentures of which investments have been made by it, and the nature and extent of the investments so made in each such body corporate.
(10) For the purposes of this section, a body corporate shall be deemed to be in the same group as the investing company– (a) if the body corporate is the managing agent of the investing company; or (b) if the body corporate and the investing company should,
in virtue of the Explanation to sub-section (1) of section 370, be deemed to be under the same management.
(11) The provisions of this section [except sub-section (9)] shall apply to an investment company, that is to say, to a company whose principal business is the acquisition of shares, stock, debentures or other securities.
(12) This. section shall not apply- (a) to any banking or insurance company; (b) to a private company, unless it is a subsidiary of a public company; (c) to investments by a holding company in its subsidiary, or (d) to investments by a managing agent or secretaries and treasurers in a company managed by him or them. 222
Investments made before commencement of Act. 373. Investments made before commencement of Act.-Where any investments have been made by a company at any time after the first day of April, 1952, which, if section 372 had been then in force, could not have been made except on the authority of a resolution passed by the investing company and the approval of the Central Government, the authority of the company by means of a resolution and the approval of the Central Government shall be obtained to such investments, within six months from the commencement of this Act; and if such authority and approval are not so obtained, the Board of directors of the company shall dispose of the investments, in so far
as they may be in excess of the limits specified in sub-section (2) of section 372 and the proviso to that sub-section, within two years from the commencement of this Act.
Penalty for contravention of section 372 or 373. 374. Penalty for contravention of section 372 or 373.-If default is made in complying with the provisions of section 372 or 373, every officer of the company who is in default shall be punishable with fine which may. extend to five thousand rupees.
Managing agent not to engage in business competing with business ofmanaged company. 375. Managing agent not to engage in business competing with
business of managed company.-(1) A managing agent shall not engage on his own account in any business which is of the same nature as, and directly competes with, the business carried on by a company of which he is the managing agent or by a subsidiary of such company, unless such company by special resolution permits him to do so.
(2) For the purposes of sub-section (1), a managing agent shall be deemed to be engaged in business on his own account, if such business is carried on by- (a) a firm in which he is a partner; or (b) a private company at any general meeting of which not less than twenty per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of the body corporate; (c) a body corporate (not being a private company) at any general meeting of which not less than seventy per cent. of the total voting power may be exercised or controlled by any of the following persons, or by any two or more of them acting together, namely, (i) the managing agent aforesaid; (ii) where such managing agent is a firm, any partner in the firm; and (iii) where such managing agent is a body corporate, any officer of such body corporate.
(3) If a managing agent engages in any business in contravention of this section, he shall be deemed to have received all profits and benefits accruing to him from such business, in trust for the company under his management or the subsidiary of such company, as the case may be; and where such profits and benefits are deemed to have been so received by the managing agent in trust for two or more such companies or subsidiaries, such profits and benefits 223 shall be held by the managing agent in trust for each of them in such proportions as may be agreed upon between them or, failing such agreement, as may be decided by the Court.
Condition prohibiting reconstruction or amalgamation of company excepton continuance of managing agent etc. to be void. 376. Condition prohibiting reconstruction or amalgamation of company except on continuance of managing agent etc. to be void.-Where any provision in the memorandum or articles of a company, or in any resolution passed in general meeting by, or by the Board of directors of, the company, or in an agreement between the company and its managing agent or any other person, whether made before or after the commencement of this Act, prohibits the reconstruction of the company or its amalgamation with any other body corporate or bodies corporate, either absolutely or except on the condition that the managing director, managing agent, secretaries and treasurers, or manager of the company is appointed or re-appointed as secretaries and treasurers, managing director, managing agent, or manager of the reconstructed company or of the body resulting from amalgamation, as the case may be, shall become void with effect from the commencement of this Act, or be void, as the case may be.
Restrictions on right of managing agent to appoint directors. 377. Restrictions on right of managing agent to appoint direc-
tors.-(1) The managing agent of a company may, if so authorised by its articles, appoint not more than two directors where the total number of the directors exceeds five, and one director where the total number does not exceed five.
(2) The managing agent may, at any time, remove any director so appointed, and appoint another director in his place or in the place of a director so appointed who resigns or otherwise vacates his office.
(3) Any provision contained in the articles of, or in any agree- ment with, the company, authorising the managing agent to appoint more
than the number of directors authorised under sub-section (1), which is in force immediately before the commencement of this Act, shall, in regard to the excess, be void, with effect from the expiry of one month from such commencement.
(4) Where at the commencement of this Act, the number of directors appointed by the managing agent exceeds the number
authorised under sub-section (1), the managing agent shall determine which of them shall continue to hold office, and intimate the choice made by him to the company before the expiry of one month from such commencement; and only the director or directors so chosen shall continue to hold office as directors after such expiry.
(5) If no choice is made by the managing agent as aforesaid, all the directors appointed by him shall, with effect from the expiry of one month from the commencement of this Act, be deemed to have vacated their offices 224 CHAP A. SECRETARIES AND TREASURERS CHAPTER IV A. SECRETARIES AND TREASURERS
Appointment of secretaries and treasurers. 378. Appointment of secretaries and treasurers.-Subject to the provisions of this Chapter, a company may appoint a firm or body corporate as its secretaries and treasurers: Provided that no company shall, at the same time, have both a managing agent and secretaries and treasurers.
Provisions applicable to managing agents to apply to secretaries andtreasurers with the exceptions and modifications specified In sections380 to
379. Provisions applicable to managing agents to apply to secre- taries and treasurers with the exceptions and modifications specified In sections 380 to 383.-Subject to the exceptions and modifications specified in sections. 380 to 383,- (a) all the provisions of this Act applicable to, or in relation to, a managing agent which is a firm or body corporate shall apply to secretaries and treasurers; and (b) all the provisions of this Act applicable to, or in relation to, any person or persons connected or associated in any manner with such a managing agent shall apply to, or in relation to, any person or persons connected or associated with secretaries and treasurers in the like manner ; and subject as aforesaid, all references in this Act to a managing agent or any person or persons connected or associated in any manner with a managing agent shall be construed accordingly, as including a reference to secretaries and treasurers or to the person or persons connected or associated with them in the like manner.
Sections 324, 330 and 332 not to apply. 380. Sections 324, 330 and 332 not to apply.-Sections 324, 330 and 332 shall not apply to secretaries and treasurers.
Section 348 to apply subject to a modification. 381. Section 348 to apply subject to a modification.-Section 348 shall apply to secretaries and treasurers subject to the modification that for the words “ten per cent. of the net annual profits’ occurring in the section, the words “seven and a half per cent. of the net annual profits” shall be substituted.
Secretaries and treasurers not to appoint directors. 382. Secretaries and treasurers not to appoint directors.-Sec- retaries and treasurers shall have no right to appoint any director 225 of the company; and sections 377 and 261 shall not apply to, or in relation to, secretaries and treasurers, or persons connected or associated with them in the manner in which the persons specified in section 261 are connected or associated with managing agents.
Secretaries and treasurers not to sell goods or articles produced bycompany, etc., unless authorised by Board. 383. Secretaries and treasurers not to sell goods or articles produced by company, etc., unless authorised by Board.-Secretaries and treasurers shall have no right, unless, and except to the extent to which, they are authorised by the Board of directors, to sell any goods or articles manufactured or produced by the company, or to purchase, obtain, or acquire machinery, stores, goods or materials for the purposes of the company, or to sell the same when no longer required for those purposes. B. MANAGERS
Firm or body corporate not to be appointed manager. 384. Firm or body corporate not to be appointed manager.-No public company, and no private company which is a subsidiary of a public company, shall, after the commencement of this Act, appoint or employ, or after the expiry of six months from such commencement, continue the appointment or employment of, any firm, body corporate or association as its manager.
Certain persons not to be appointed managers.
385. Certain persons not to be appointed managers.-(1) No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its manager who- (a) is an undischarged insolvent, or has at any time within the preceding five years been adjudged an insolvent; or (b) suspends, or has at any time within the preceding five years suspended, payment to his creditors; or makes, or has at any time within the preceding five years made, a composition with them; or (c) is,. or has at any time within the preceding five years been, convicted by a Court in India of an offence involving moral turpitude.
(2) The Central Government may, by notification in the Official Gazette, remove the disqualification incurred by any person in virtue
of clause (a), (b), or (c) of sub-section (1), either generally or in relation to any company or companies specified in the notification. 1512 M. of Law-29. 226
Number of companies of which a person may be appointed manager. 386. Number of companies of which a person may be appointed
manager.-(1) No company shall, after the commencement of this Act, appoint or employ any person as manager, if he is either the manager or the managing director of any other company, except as provided in
sub-section (2).
(2) A company may appoint or employ a person as its manager, if he is the manager or managing director of one, and not more than one, other company: Provided that such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the. meeting, and of which meeting and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.
(3) Where, at the commencement of this Act, any person is holding the office either of manager or of managing director in more than two companies, he shall, within one year from the commencement of this Act, choose not more than two of those companies as companies in which he wishes to continue to hold the office of manager or managing director, as the case may be; and the provisions of clauses (b) and
(c) of sub-section (1) and of sub-sections (2) and (3) of section 276 shall apply mutatis mutandis in relation to this case, as those provisions apply in relation to the case of a director.
(4) Notwithstanding anything contained in sub-sections (1) to
(3), the Central Government may, by order, permit any person to be appointed as a manager of more than two companies, if the Central Government is satisfied that it is necessary that the companies should, for their proper working, function as a single unit and have a common manager.
(5) This section shall not apply to a private company, unless if is a subsidiary of a public company.
Remuneration of manager. 387. Remuneration of manager.-The manager of a company may, subject to the provisions of section 198, receive remuneration either by way of a monthly payment, or by way of a specified percentage, not exceeding five, of the “net profits” of the company calculated in the manner laid down in sections 349, 350, and 351, or partly by the one way and partly by the other.
Application of sections 310, 311, 312 and 317 to managers. 388. Application of sections 310, 311, 312 and 317 to managers.-The provisions of sections 310, 311 and 317 shall apply in relation to the manager of a company as they apply in relation to a managing director thereof, and those of section 312 shall apply in re- lation to the manager of a company, as they apply to a director thereof 227 CHAP ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS CHAPTER V ARBITRATION, COMPROMISES, ARRANGEMENTS AND RECONSTRUCTIONS
Power for companies to refer matters to arbitration.
389. Power for companies to refer matters to arbitration.-(1) A company may, by written agreement, refer to arbitration, in accordance with the Arbitration Act, 1940 (10 of 1940), an existing or future difference between itself and any other company or person.
(2) A company which is a party to an arbitration may delegate to the arbitrator power to settle any terms or to determine any matter, capable of being lawfully settled or determined by the company itself, or by its Board of directors, managing director, managing agent, secretaries and treasurers, or manager.
(3) The provisions of the Arbitration Act, 1940 (10 of 1940), shall apply to all arbitrations in pursuance of this Act to which a company is a party.
Interpretation of sections 391 and 393. 390. Interpretation of sections 391 and 393.-In sections 391 and 393,- (a) the expression “company” means any company liable to be wound up under this Act; (b) the expression “arrangement” includes a reorganization of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by both those methods; and (c) unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors.
Power to compromise or make arrangements with creditors and members. 391. Power to compromise or make arrangements with creditors and
members.-(1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them; . the Court may, on the application of the company or of, any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors 228 or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs.
(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members. or class of members, as the case may be, present and voting either in person or, where proxies are allowed, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company..
(3) An order made by the Court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the registrar.
(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified Copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.
(5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy in respect of which default is made.
(6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of.
(7) An appeal shall lie from any order made by a Court exercising original jurisdiction under this section to the Court empowered to hear appeals from the decisions of that Court, or if more than one Court is so empowered, to the Court of inferior jurisdiction.
The provisions of sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application.
Power of High Court to enforce compromises and arrangements. 392. Power of High Court to enforce compromises and arrange-
ments.-(1) Where a High Court makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it- (a) shall have power to supervise the carrying out of the compromise or arrangement; and 229 (b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.
(2) If the Court aforesaid is satisfied that a compromise or ar- rangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.
(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under section 153 of the Indian Companies Act, 1913 (7 of 1913), sanctioning a compromise or an arrangement.
Information as to compromises or arrangements with creditors andmembers. 393. Information as to compromises or arrangements with creditors
and members.-(1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391,- (a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particulary stating any material interests of the directors, managing director, managing agent, secretaries and treasurers or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interest of the compromise or arrangement, if, and in so far as, it is different from the effect on the like interests of other persons; and (b) in every notice calling the meeting which is given by advertisement, there shall be included either such, a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend ‘the meeting may obtain copies of such a statement as aforesaid.
(2) Where the compromise or arrangement affects the rights of debenture holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company’s directors.
(3) Where a notice given by advertisement, includes a notifica- tion that copies of a statement setting forth the terms of the com- promise or arrangement proposed and explaining its effect can be obtained by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement. 230
(4) Where default is made in complying with any of the require- ments of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees; and for the purpose of this sub-section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company: Provided that a person shall not be punishable under this sub- section if he shows that the default was due to the refusal of any other person, being a director, managing director, managing agent, secretaries and treasurers, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.
(5) Every director, managing director, managing agent, secre- taries and treasurers or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section; and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.
Provisions for facilitating reconstruction and amalgamation ofcompanies. 394. Provisions for facilitating reconstruction and amalgamation
of companies.-(1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement pro- posed between a company and any such persons as are mentioned in that section, and it is shown to the Court- (a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgama- tion of any two or more companies; and (b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a “transferor company”) is to be transferred to another company (in this section referred to as “the transferee company”); the Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; (ii) the allotment or appropriation by the transferee com- pany of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; 231 (iv) the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.
(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.
(3) Within fourteen days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration. If default is made in complying with this sub-section, the com- pany, and every officer of the company who is in default, shall be, punishable with fine which may extend to fifty rupees..
(4) In this section- (a) “property” includes property, rights and powers of every description; and “liabilities” includes duties of every description; and (b) “transferee company” does not include any company other than a company within the meaning of this Act; but “transferor company” includes any body corporate, whether a company within the meaning of this Act or not.
Power and duty to acquire shares of shareholders dissenting fromscheme or contract approved by majority. 395. Power and duty to acquire shares of shareholders
dissenting from scheme or contract approved by majority.-(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as “the transferor company”) to another company (in this section referred to as “the transferee company”), has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares; and when such a notice is given, the 232 transferee company, shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given, the Court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company. Provided that where shares in the transferor company of the same class as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of the values of all the shares in the company of such class, the foregoing provisions of this sub-section shall not apply, unless- (a) the transferee company offers the same terms to all holders of the shares of that class (other than those already held as aforesaid) whose transfer is involved; and (b) the holders who approve the scheme or contract, besides holding not less than nine-tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares.
(2) Where, in pursuance of any such scheme or contract as afore- said, shares, or shares of any class. in a company are transferred to another company or its nominee, and those shares together with any other shares or any other shares of the same class, as the case may be, in the first-mentioned company held at the date of the transfer by, or by a nominee for, the transferee company or its subsidiary comprise nine-tenths in value of the shares, or the shares of that class, as the case may be, in the first-mentioned company, them- (a) the transferee company shall, within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement), give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and (b) any such holder may, within three months from the giving of the notice to him, require the transferee company to acquire the shares in question; and where a shareholder gives notice under clause (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed, or as the ‘Court on the application of either the transferee company or the shareholder thinks fit to order.
(3) Where a notice has been given by the transferee company
under sub-section (1) and the Court has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Court by the dissenting shareholder is then pending, after that application lips been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed 233 on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire; and the transferor company shall thereupon register the transferee company as the holder of those shares: Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding.
(4) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sum’s and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received.
(5) In this section- (a) “dissenting shareholder” includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract; (b) “transferor company” and “transferee company” shall have the same meaning as in section 394.
(6) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect-
(a) with the substitution, in sub-section (1), for the words “the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary),” of the words “the shares affected” and with the omission of the proviso to that subsection;
(b) with the omission of sub-section (2);
(c) with the omission in sub-section (3) of the words “together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company” and of the proviso to that sub-section; and
(d) with the omission of clause (b) of sub-section (5).
Power of Central Government to provide for amalgamation of companiesin national Interest. 396. Power of Central Government to provide for amalgamation of
companies in national Interest.-(1) Where the Central Government is satisfied that it is essential in the national interest that two or more companies should amalgamate, then, notwithstanding anything contained in sections 394 and 395 but subject to the provisions of this section, the Central Government. may, by order notified in the Official Gazette, provide for the amalgamation of those companies into a single company with such constitution; with such property, powers, rights, interests, authorities and privileges; and with such liabilities, duties, and obligations; as may be specified in the order. 1512 M. of Law-30. 234
(2) The order aforesaid may contain such consequential, inci- dental and supplemental provisions as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.
(3) Every member or creditor (including a debenture holder) of each of the companies before the amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the company of which he was originally a member or creditor; and to the extent to which the interest or rights of such member or creditor in or against the company resulting from the amalgamation are less than his interest in or rights against the original company, he shall be entitled to compensation which shall be assessed by such authority as may be prescribed. The compensation so assessed shall be paid to the member or creditor concerned by the company resulting from the amalgamation.
(4) No order shall be made under this section, unless- (a) a copy of the proposed order has been sent in draft to each of the companies concerned; and (b) the Central Government has considered, and made such modifications, if any, in the draft order as may seem to it desirable in the light of any suggestions and objections which may be received by it from any such company within such period as the Central Government may fix in that behalf, not being less than two months from the date on which the copy aforesaid is received by that company, or from any class of shareholders therein, or from any creditors or any class of creditors thereof.
(5) Copies of every order, made under this section shall, as soon as may be after it has been made, be laid before both Houses of Parliament. CHAP PREVENTION OF OPPRESSION AND MISMANAGEMENT CHAPTER VI PREVENTION OF OPPRESSION AND MISMANAGEMENT A. Powers of Court
Application to Court for relief in cases of oppression.
397. Application to Court for relief in cases of oppression.-(1) Any members of a company who complain ‘that the affairs of the company are being conducted in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub-section (1), the Court is of opinion- (a) that the company’s affairs are being conducted in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up; the Court may, with a view to bringing to an end the matters com- plained of make such order as it thinks fit. 235
Application to Court for relief in cues of mismanagement. 398. Application to Court for relief in cues of mismanagement.-
(1) Any members of a company who complain- (a) that the affairs of the company are being conducted in a manner prejudicial to the interests of the company, or (b) that a material change (not being a change brought about by, or in the interests of, any creditors including debenture holders, or any class of shareholders, of the company) has taken place in the management or control of the company, whether by an alteration in its Board of directors, or of its managing agent or secretaries and treasurers, or in the constitution or control of the firm or body corporate acting as its managing agent or secretaries and treasurers, or in the ownership of the company’s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to the interests of the company; may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub-section (1), the Court is of opinion that the affairs of the company are being conducted as aforesaid or that by reason of any material change as aforesaid in the management or control of the company, it is likely that the affairs of the company will be conducted as aforesaid, the Court may, with a view to bringing to an end or preventing the matters complained of or apprehended, make such order as it thinks fit.
Right to apply under sections 397 and 398.
399. Right to apply under sections 397 and 398.-(1) The following members of a company shall have the right to apply under section 397 or 398: – (a) in the case of a company having a share capital, not less than one hundred members of the company or not less than onetenth of the total number of its members, whichever is less, or any member or members holding not less than one- tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.
(2) For the purposes of sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member.
(3) Where any members of a company are entitled to make an
application in virtue of sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.
(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the Court under section 397 or 398, notwithstanding that the requirements of clause (a) or clause
(b), as the case may be, of sub-section (1) are not, fulfilled.
(5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem 236 reasonable, for the payment of any costs which the Court dealing with the application may order such member or members to pay to any other person or persons who are parties to the application.
Notice to be given to Central Government of applications undersections 397 and 398. 400. Notice to be given to Central Government of applications under sections 397 and 398.-The Court shall give notice of every application made to it under section 397 or 398 to the Central Govern- ment, and shall take into consideration the representations, if any, made to it by that Government before passing a final order under that section.
Right of Central Government to apply under sections 397 and 398. 401. Right of Central Government to apply under sections 397 and 398.-The Central Government may itself apply to the Court for an order under section 397 or 398, or cause an application to be made to the Court for such an order by any person authorised by it in this behalf.
Powers of Court on application under section 397 or 398. 402. Powers of Court on application under section 397 or 398. Without prejudice to the generality of the powers of the Court under section 397 or 398, any order under either section may provide for- (a) the regulation of the conduct of the company’s affairs in future; (b) the purchase of the shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other, namely : – (i) the managing director, (ii) -any other director, (iii) the managing agent, (iv) the secretaries and treasurers, and (v) the manager, upon such terms and conditions as may, in the opinion of the Court, be just and equitable in all the circumstances of the case; (e) the termination, setting aside or modification of any agreement between the company and any person not referred to in clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further that no such agreement shall be modified except after obtaining the consent of the party concerned; (f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (g) any other matter for which in the opinion of the Court it is just and equitable that provision should be made. 237
Interim order by Court. 403. Interim order by Court.-Pending the making by it of a final order under section 397 or 398, as the case may be, the Court may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company’s affairs, upon such terms and conditions as appear to it to be just and equitable.
Effect of alteration of memorandum or articles of company by orderunder section 397 or 398. 404. Effect of alteration of memorandum or articles of company by
order under section 397 or 398.-(1) Where an order under section 397 or 398 makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power except to the extent, if any, permitted in the order, to make without the leave of the Court, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.
(2) Subject to the provisions of sub-section (1), the alterations made by the order shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act; and the said provisions shall. apply accordingly to the memorandum or articles as so altered.
(3) A certified copy of every order altering, or giving leave to alter, a company’s memorandum or articles, shall within fifteen days after the making thereof, be filed by the company with the Registrar who shall register the same.
(4) If default is made in complying with the provisions of sub-
section (3), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
Addition of respondents to application under section 397 or 398. 405. Addition of respondents to application under section 397 or 398.-If the managing director or any other director, the managing agent, secretaries and treasurers or the manager, of a company, or any other person, who has not been impleaded as a respondent to any application under section 397 or 398 applies to be added as a respondent thereto, the Court shall, if it is satisfied that there is sufficient cause for doing so, direct that he may be added as a res- pondent accordingly.
Application of sections 539 to 544 to proceedings under sections 397and 398. 406.Application of sections 539 to 544 to proceedings under sections 397 and 398.-In relation to an application under section 397 or 398, sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI.
Consequences of termination or modification of certain agreements. 407. Consequences of termination or modification of certain
agreements.-(1) Where an order of a Court made under section 397 or 398 terminates, sets aside, or modifies an agreement such as is referred to in clause (d) or (e) of section 402,- (a) the order shall not give rise to any claim whatever against the company by any person for damages or for compen- sation for loss of office or in any other respect, either in pursuance of the agreement or otherwise; (b) no managing or other director, managing agent, secre- taries and treasurers, or manager whose agreement is so terminated or set aside and no person who, at the date of the order terminating or setting aside the agreement was, or subsequently becomes, an associate of such managing agent or secretaries 238 and treasurers shall, for a period of five years from the date of the order terminating the agreement, without the leave of the Court, be appointed, or act, as the managing or other director, managing agent, secretaries and treasurers, or manager of the company.
(2) (a) Any person who knowingly acts as a managing or other director, managing agent, secretaries and treasures, or manager of a company in contravention of clause (b) of sub-
section, (1); (b) where the person so acting as managing agent or as secretaries and treasurers is a firm or body corporate, every partner in the firm, or every director of the body corporate who is knowingly a party to such contravention; and (c) every other director or every director, as the case may be, of the company, who is knowingly a party to such contra- vention; shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both.
(3) No Court shall grant leave under clause (b) of sub-section
(1) unless notice of the intention to apply for leave has been served on the Central Government and that Government has been given an opportunity of being heard in the matter. B. Powers of Central Government
Powers of Government to prevent oppression or mismanagement. 408. Powers of Government to prevent oppression or mis-
management.-(1) Notwithstanding anything contained in this Act, the Central Government may appoint not more than two persons, being members of the company, to hold office as directors thereof for such period, not exceeding three years on any one occasion, as it may think fit, if the Central Government, on the application of not less than two hundred members of the company or of members of the company holding not less than one-tenth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or appointments in order to prevent the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudicial to the interests of the company: Provided that in lieu of passing an order as aforesaid, the Central Government may, if the company has not availed itself of the option given to it under section 265, direct the company to amend its articles in the manner provided in that section and make fresh appointments of directors in pursuance of the articles as so amended. within such time as may be specified in that behalf by the Central Government.
(2) In case the ‘Central Government passes an order under the
proviso to sub-section (1), it may, if it thinks fit, direct that until’ new directors are appointed in pursuance of the order aforesaid, not more than two members of the company specified by the Central Government shall hold office as additional directors of the company.
(3) For the purpose of reckoning two-thirds or any other propor- tion of the total number of directors of the company, any director or
directors appointed by the Central Government under sub-section (1) or
(2) shall not be taken into account. 239
Power of Central Government to prevent change in Board of directorslikely to affect company prejudicially. 409. Power of Central Government to prevent change in Board
of directors likely to affect company prejudicially.-(1) Where a complaint is made to the Central Government by the managing director or any other director, the managing agent, or the secretaries and treasurers, of a company that as a result of a change which has taken place or is likely to take place in the ownership of any shares held in the company, a change in the Board of directors is likely to take place which (if allowed) would affect prejudicially the affairs of the company, the Central Government may, if satisfied, after such inquiry as it thinks fit to make that it is just and proper so to do, by order, direct that no resolution passed or ‘action taken to affect a change in the Board of directors after the date of the complaint shall have effect unless confirmed by the Central Government; and any such order shall have effect notwithstanding anything to the contrary contained in any other provision of this Act or in the memorandum or articles of the company, or in any agreement with, or any resolution passed in general meeting by, or by the Board of directors of, the company.
(2) The Central Government shall have power when any such complaint is received by it, to make an interim order to the effect
set out in sub-section (1), before making or completing the inquiry aforesaid.
(3) Nothing contained in sub-sections (1) and (2) shall apply to a private company, unless it is a subsidiary of a public company. CHAP CONSTITUTION AND POWERS OF ADVISORY COMMISSION. CHAPTER VII CONSTITUTION AND POWERS OF ADVISORY COMMISSION
Appointment of Advisory Commission. 410. Appointment of Advisory Commission.-For the purpose of advising the Central Government on the matter referred to in clause (a) of section 411, on the applications referred to in clause (b) of that section and on such other matters as the Central Government may think fit, the Central Government shall- (a) constitute a Commission (hereinafter called the “Advisory Commission”) consisting of not more than’ five persons with suitable qualifications; and (b) appoint one of those persons to be the Chairman of the Commission.
Duties of Advisory Commission. 411. Duties of Advisory Commission.-It shall be the duty of the Advisory Commission to inquire into and advise the Central Government- (a) before a notification is issued under section 324 in respect of any description of industry or business, on the necessity for, and advisability of, issuing the notification; (b) on all applications made to the Central Government under section 259, 268, 269, 310, 311, 326, 328, 329, 332, 343, 345, 346. 352, 408, or 409; and (c) on all other matters which may be referred to the Commission by the Central Government.
Forms and procedure in cases referred to Advisory Commission. 412. Forms and procedure in cases referred to Advisory
Commission.-(1) Every application made to the Central Government under any of the sections referred to in clause (b) of section 411 shall be in such form as may be prescribed. 240
(2) (a) Before any application is made by a company to the Central Government under any of the sections aforesaid, there shall be issued by or on behalf of the company a general notice to the members thereof, indicating the nature of the application proposed to be made. (b) Such notice shall be published at least once in a news- paper in a principal language of the district in which the registered office of the company is situate and circulating in that district, and at least once in English in an English newspaper circulating in that district. (c) Copies of the notices, together with, a certificate by the company as to the due publication thereof, shall be attached to the application. (d) Nothing in clause (a), (b) or (c) shall apply to a private company which is. not the managing agent of a public company.
Powers of Advisory Commission. 413. Powers of Advisory Commission.-For the purpose of making any inquiry under section 411, the Advisory Commission may- (a) require the production before it of any books or other documents in the possession, custody or control of the company and relating to any matter under inquiry; (b) call for any further information or explanation, if the Commission is of opinion that such information or explanation is necessary in order that the books or other documents pro- duced before it may afford full particulars of the matter to which they purport to relate; (c) with such assistants as it thinks necessary, inspect any books or other documents so produced and make copies thereof or take extracts therefrom; (d) require any managing director or any other director, managing agent, secretaries and treasurers, manager or other officer of the company, or any shareholder or any other person who, in the opinion of the Commission, is likely to furnish information with respect to the affairs of the company relating to any matter under inquiry, to appear before it and examine such person on oath or require him to furnish such information as may be required; and administer an oath accordingly to the person for the purpose.
Penalties. 414. Penalties.-If any person refuses or neglects to produce any book or other document in his possession or custody which he is required to produce under section 413 or to answer any question put to him relating to any matter under inquiry, he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.
Immunity for action taken in good faith. 415. Immunity for action taken in good faith.-No suit or other legal proceeding shall lie against the Commission or the Chairman or any member thereof or against the Central Government, in respect of anything which is in good faith done or intended to be done in pursuance of this Chapter, or of the provisions referred to in section 411. or of any rules or orders made thereunder, 241 CHAP MISCELLANEOUS PROVISIONS. CHAPTER VIII MISCELLANEOUS PROVISIONS Contracts where company is undisclosed principal
Contracts by agents of company in which company is undisclosedprincipal. 416. Contracts by agents of company in which company is un-
disclosed principal.-(1) Every person, being the managing agent secretaries and treasurers, manager or other agent of a public company or of a private company which is a subsidiary of a public company, who enters into a contract for or on behalf of the company in which contract the company is an undisclosed principal shall, at the time of entering into the contract, make a memorandum in writing of the terms of the contract, and specify therein the person with whom it is entered into.
(2) Every such person who enters into a contract as aforesaid shall forthwith deliver the memorandum to the company and send copies thereof to each of the directors; and such memorandum shall be filed in the office of the company and laid before the Board of directors at its next meeting.
(3) If default is made in complying with the requirements of this section,- (a) the contract shall, at the option of the company, be voidable as against the company; and (b) the person who enters into the contract, or every officer of the company who is in default, as the case may be, shall be punishable with fine which may extend to two hundred rupees. Employees’ securities and provident funds
Employees’ securities to be deposited in Scheduled Bank. 417. Employees’ securities to be deposited in Scheduled Bank.–
(1) All moneys or securities deposited with a company by its em- ployees in pursuance of their contracts of service with the company shall be kept or deposited by the company in a special account to be opened by the company for the purpose in a Scheduled Bank.
(2) No portion of such moneys or securities shall be utilised by the company except for the purposes agreed to in the contracts of service.
(3) A receipt for moneys deposited with a company by its em- ployee shall not be deemed to be a security within the meaning of this section; and the moneys themselves shall accordingly be deposited with
a Scheduled Bank as provided in sub-section (1).
Provisions applicable to provident funds of employee.
418. Provisions applicable to provident funds of employee.- (1) Where a provident fund has been constituted by a company for its employees or any class of its employees, all moneys contributed to such fund (whether by the company or by the employees)’ or accruing by way of interest or otherwise to such fund, shall be either deposited in a Post Office Savings Bank account or invested in the securities mentioned or referred to in clauses (a) to (e) of section 20 of the Indian Trusts Act, 1882 (2 of 1882): Provided that where one-tenth part of the whole amount of the moneys belonging to such fund exceeds the maximum amount which may be deposited in a Post Office Savings Bank account under the rules regulating such deposits for the time being in force, the amount 242 of such excess may be kept or deposited in a special account to be opened for the purpose in a Scheduled Bank.
(2) Notwithstanding anything to the contrary in the rules of any
provident fund to which sub-section (1) applies or in any contract between a company and its employees, no employee shall be entitled to receive, in respect of such portion of the amount to his credit in such fund as is invested in accordance with the provisions of sub-
section (1), interest at a rate exceeding the rate of interest yielded by such investment.
(3) Nothing in sub-section (1) shall affect any rights of an em- ployee under the rules of a provident fund to obtain advances from or to withdraw money standing, to his credit in the fund, where the fund is a recognised provident fund within the meaning of clause (a) of section 58A of the Indian Income-tax Act, 1922 (11 of 1922), or where the rules of the fund contain provisions corresponding to rules 4, 5, 6, 7, 8 and 9 of the Indian Income-tax (Provident Funds Relief) Rules.
(4) Where a separate trust has been created by a company with
respect to any provident fund referred to in sub-section (1), the company shall be bound to collect the contributions of the employees concerned and pay such contributions as well as its own contributions, if any, to the trustees; but in other respects, the obligations laid on the company by this section shall devolve on the trustees and shall be discharged by them instead of by the company.
Right of employee to see bank’s receipt for moneys or securitiesreferred to in section 417 or 418. 419. Right of employee to see bank’s receipt for moneys or securities referred to in section 417 or 418.-An employee shall be en- titled, on request made in this behalf to the company, or to the
trustees referred to in sub-section (4) of section 418, as the case may be, to see the bank’s receipt for any money or security such as is referred to in sections 417 and 418.
Penalty for contravention of sections 417, 418 and 419. 420. Penalty for contravention of sections 417, 418 and 419.-Any officer of a company, or any such trustee of a provident fund as is
referred to in sub-section (4) of section 418 who, knowingly, contra- venes, or authorises or permits the contravention of, the provisions of section 417, 418 or 419, shall be punishable with fine which may extend to five hundred rupees. Receivers and Managers
Filing of accounts of receivers. 421. Filing of accounts of receivers.-Every receiver of the pro- perty of a company who has been appointed under a power conferred by any instrument and who has taken possession, shall once in every half year while he remains in possession, and also on ceasing to act as receiver, file with the Registrar an abstract in the prescribed form of his receipts and payments during the period to which the abstract relates.
Invoices, etc., to refer to receiver where there is one. 422.Invoices, etc., to refer to receiver where there is one.- Where a receiver of the property of a company has been, appointed, every invoice, order for goods, or business letter issued by or on behalf of the company, or the receiver of the company, being a document on or in which the name of the company appears, shall contain a statement that I receiver has been appointed 243
Penalty for non-compliance with sections 421 and 422. 423.Penalty for non-compliance with sections 421 and 422.-If default is made in complying with the requirements of section 421 or 422, the company, and every officer of the company who Is in default, shall be punishable with fine which may extend to two hundred rupees. For the purposes of this section, the receiver shall be deemed to be an officer of the company.
Application of sections 421 to 423 to receivers and managers appointedby Court and managers appointed in pursuance of an instrument. 424. Application of sections 421 to 423 to receivers and managers appointed by Court and managers appointed in pursuance of an instrument.-The provisions of sections 421, 422 and 423 shall apply to the receiver of, or any person appointed to manage, the property of a company, appointed by a Court or to any person appointed to manage the property of a company under any powers contained in an instrument, in like manner as they apply to a receiver appointed under any powers contained in an instrument. PART WINDING UP. PART VII WINDING UP CHAP PRELIMINARY. CHAPTER I.-PRELIMINARY Modes of winding up
Modes of winding up.
425. Modes of winding up.-(1) The winding up of a company may be either- (a) by the Court; or (b) voluntary; or (c) subject to the supervision of the Court.
(2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of those modes. Contributories
Liability as contributories of present and past members. 426. Liability as contributories of present and past members.–
(1) In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject to the provisions of section 427 and subject also to the following qualifications, namely:- (a) a past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up; (b) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member; (c) no past member shall be liable to contribute unless it appears to the Court that the present members are unable to satisfy the contributions required to be made by them in pursuance of this Act; (d) in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member; 244 (e) in the case of a company limited by guarantee, no con- tribution shall, subject to the provisions of sub-section
(2), be required from any past or present member exceeding the amount undertaken. to be contributed by him to the assets of the company in the event of its-being wound up; (f) nothing in this Act shall invalidate any provision con- tained in any policy, of insurance or other contract whereby the liability of individual members on the policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of the policy or contract; (g) a sum due to any past or present member of the company in his character as such, by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member, in a case of competition between himself and any other creditor who is not a past or present member of the company; but any such sum shall be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.
(2) In the winding up of a company limited by guarantee which has a share capital, every member of the company shall be liable, in addition to the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up, to contri- bute to the extent of any sums unpaid on any shares held by him as if the company were a company limited by shares.
Obligations of directors, managing agents and managers whoseliability is unlimited. 427. Obligations of directors, managing agents and managers whose liability is unlimited.-In the winding up of a limited company, any director, managing agent, secretaries and treasurers or manager, whether past or present, whose liability is, under the provisions of this Act, unlimited shall, in addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were, at the commencement of the winding up, a member of an unlimited company: Provided that- (a) a past director managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, if he has ceased to hold office for a year or upwards before the commencement of the winding up; (b) a past director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution in respect of any debt or liability of the company contracted after he ceased to hold office; (c) subject to the articles of the company, a director, managing agent, secretaries and treasurers or manager shall not be liable to make such further contribution, unless the Court deems it necessary to require the contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up.
Definition of “contributory”. 428. Definition of “contributory”.-The term “contributory” means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up; and for the purposes of all proceed- 245 ings for determining, and all proceedings prior to the final deter- mination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory.
Nature of liability of contributory.
429. Nature of liability of contributory.-(1) The liability of a contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the times specified in calls made on him for enforcing the liability.
(2) No claim founded on the liability of a contributory shall be cognizable by any Court of Small Causes sitting outside the presidency-towns.
Contributories in case of death of member.
430. Contributories in case of death of member.-(1) If a contri- butory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable in a due course of administration, to contribute to the assets of the company in discharge of his liability, and shall be contributories accordingly.
(2) If the legal representatives make default in paying any money ordered to be paid by them, proceedings may be taken for. administering the estate of the deceased contributory and compelling payment there out of the money due.
(3) For the purposes of this section, where the deceased contributory was a member of a Hindu joint family governed by the Mitakshara School of Hindu Law, his legal representatives shall be deemed to include the surviving coparceners.
Contributories in case of insolvency of member. 431.Contributories in case of insolvency of member.-If a con- tributory is adjudged insolvent, either before or after. he has been placed on the list of contributories, – (a) his assignees in insolvency shall represent him for all the purposes of the winding up, and shall be contributories accordingly, and may be called on to admit to proof against the estate of the insolvent, or otherwise to allow to be paid out of his assets in due course of law, any money due from the insolvent in respect of his liability to contribute to the assets of the company; and (b) there may be proved against the estate of the insolvent the estimated value of his liability to future calls as well as calls already made.
Contributories in case of winding up of a body corporate which is amember. 432.Contributories in case of winding up of a body corporate which is a member.-If a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributories,- (a) the liquidator of the body corporate shall represent it for all the purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company; and (b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made. 246 CHAP WINDING UP BY THE COURT. CHAPTER II.- WINDING UP BY THE COURT Cases in which company may be wound up by the Court
Circumstances in which company may be wound up by Court. 433. Circumstances in which company may be wound up by Court.-A company may be wound up by the Court,- (a) if the company has, by special resolution, resolved that the company be wound up by the Court; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation,. or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Court is of opinion that it is just and equitable that the company should be wound up.
Company when deemed unable to pay its debts.
434. Company when deemed unable to pay its debts.- (1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; (b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company Is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.
(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor If it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. Transfer of proceedings
Transfer of winding up proceedings to District Court. 435. Transfer of winding up proceedings to District Court.- Where a High. Court makes an order for winding up a company under this Act, the, High Court may, if it thinks fit, direct all subsequent proceedings to be had in a District Court subordinate thereto 247 or, with the consent of any other High Court, in such High Court or in a District Court subordinate thereto; and thereupon for the purposes of winding up the company, the Court in respect of which such direction is given shall be deemed to be “the Court” within the meaning of this Act, and shall have all the jurisdiction and powers of a High Court under this Act.
Withdrawal and transfer of winding up from one District Court toanother. 436. Withdrawal and transfer of winding up from one District Court to another.-If during the progress of a winding up in a District Court, it appears to the High Court that the same could be more conveniently proceeded with in the High Court or in any other District Court, the High Court may, as the case may require’- (a) withdraw the case and. proceed with the winding up itself ; or (b) transfer the case to such other District Court, whereupon the winding up shall proceed in that District Court,
Power of High Court to retain winding up proceedings in DistrictCourt. 437. Power of High Court to retain winding up proceedings in District Court.-The High Court may direct that a. District Court in which proceedings for winding up a company have been commenced, shall retain and continue the proceedings, although it may not be the Court in which they ought to have been commenced.
Jurisdiction of High Court under sections 435, 436 and 437 to beexercised at any time and at any stage. 438. Jurisdiction of High Court under sections 435, 436 and 437 to be exercised at any time and at any stage.-The High Court shall have jurisdiction to pass orders under section 435, 436 or 437 at any time and at any stage and either on the application of, or without application from, any- of the parties to the proceedings. Petition for winding up
Provisions as to applications for winding up.
439. Provisions as to applications for winding up.-(1) An appli- cation to the Court for the winding up of a company shall be by petition presented, subject to the provisions of this section,— (a) by the company; or (b)by any creditor or creditors, including any contingent or prospective creditor or creditors; or (c) by any contributory or contributories; or (d) by all or any of the parties specified in clauses (a), (b) and (c), whether together or separately; or (e) by the Registrar; or (f)in a case failing under section 243, by any person authorised by the Central Government in that behalf.
(2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors
within the meaning of clause (b) of sub-section (1).
(3) A contributory shall be entitled to present a petition for, winding up a company, 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,’ 248
(4) A contributory shall not be entitled to present a petition for winding up a company unless- (a) either the number of members is reduced, in the case of a public company, below seven, and, in the case of a private company, below two; or (b)the shares in respect of which he is a contributory, or some of them, either were 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.
(5) Except in the case where he is authorised in pursuance of
clause (f) of sub-section (1), the Registrar shall be entitled to present a petition for winding up a company only on the grounds speci- fied in clauses (b), (c) and (e) of section 433: Provided that the Registrar shall not present a petition on the ground specified in clause (e) aforesaid, unless it appears to him either from the financial condition of the company as disclosed in its balance-sheet or from the report of an inspector appointed under section 235 or 237, that the company is unable to pay its debts: Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of the petition on any of the grounds aforesaid.
(6) The Central Government shall not accord its sanction in pursuance of the foregoing proviso, unless the company has first been afforded an opportunity of making its representations, if any.
(7) A petition for winding up a company on the ground specified in clause (b) of section 433 shall not be presented- (a) except by the Registrar or by a contributory; or (b)before the expiration of fourteen days after the last day on which the statutory meeting referred to in clause (b) aforesaid ought to have been held.
(8) Before a petition for winding up a company presented by a contingent or prospective creditor is admitted, the leave of the Court shall be obtained for the admission of the petition and such leave shall not be granted- (a) unless, in the opinion of the Court, there is a prima- facie case for winding up the company; and (b) until such security for costs has been given as the Court thinks reasonable.
Right to present winding up petition where company is being wound upvoluntarily or subject to Court’s supervision. 440. Right to present winding up petition where company is being
wound up voluntarily or subject to Court’s supervision.-(1) Where a company is being wound up voluntarily or subject to the supervision of the Court, a petition for its winding up by the Court may be presented by– (a) any person authorised to do so under section 439, and subject to the provisions of that section; or (b) the Official Liquidator, 249
(2) The Court shall not make a winding up order on a petition
presented to it under sub-section (1), unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both. Commencement of winding up
Commencement of winding up by Court.
441. Commencement of winding up by Court.-(1) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.
(2) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up. Powers of Court
Power of Court to stay or restrain proceedings against company. 442. Power of Court to stay or restrain proceedings against company.-At any time after the presentation of a winding up petition and before a winding up order has been made, the company, or any creditor or contributory, may- (a) where any suit or proceeding against the company is pending in the Supreme Court or in any High Court, apply to the Court in which the suit or proceeding is pending for a stay of proceedings therein; and (b) where any suit or proceeding is pending against the company in any other Court, apply to the Court having jurisdiction to wind up the company, to restrain further proceedings in the suit or proceeding; and the Court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit.
Powers of Court on hearing petition.
443. Powers of Court on hearing petition.-(1) On hearing a winding up petition, the Court may- (a) dismiss it, with or without costs; or (b) adjourn the hearing conditionally or unconditionally; or (c) make any interim order that it thinks fit; or (d) make an order for winding up the company with or without costs, or any other order that it thinks fit: Provided that the Court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.
(2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make an order of winding up, if it is of opinion that 250 some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
(3) Where the petition is presented on the ground of default in delivering the statutory report to the Registrar, or in holding the statutory meeting, the Court may- (a) instead of making a winding up order, direct that the statutory report shall be delivered or that a meeting shall be held; and (b) order the costs to be paid by any persons who, in the opinion of the Court, are responsible for the default. Consequences of winding up order
Order for winding up to be communicated to Official Liquidator. 444. Order for winding up to be communicated to Official Liquidator.-Where the Court makes an order for the winding up of a company, the Court shall forthwith cause intimation thereof to be sent to the Official Liquidator.
Copy of winding up order to be filed with Registrar.
445. Copy of winding up order to be filed with Registrar.-(1) On the making of ‘a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the company to file with the Registrar a certified copy of the order, within one month from the date of the making of the order. If default is made in complying with the foregoing provision, the petitioner, or as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues.
(2) On the filing of a certified copy of the winding up order, the Registrar shall make a minute thereof in his books relating to the company, and shall notify in the Official Gazette that such an order has been made.
(3) Such order, shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.
Suits stayed on winding up order.
446. Suits stayed on winding up order.-(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.
(2) The Court which Is winding up the- company shall, notwith- standing anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of, any suit or proceeding by or against the company.
(3) Any suit or proceeding by or against the company which Is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. 251
Effect of winding up order. 447. Effect of winding up order.-An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. Official Liquidators
Appointment of Official Liquidator.
448. Appointment of Official Liquidator.–(1) For the purposes of this Act, so far as it relates to the winding up of companies by the Court,- (a) there shall be attached to each High Court, an Official Liquidator appointed by the Central Government, who shall be a whole-time officer, unless the Central Government considers that there will not be sufficient work for a whole-time officer in which cage a part-time officer may be appointed; and (b) the Official Receiver attached to a District Court for insolvency purposes, or if there is no such Official Receiver, then, such person as the Central Government may, by notification in the Official Gazette appoint for the purpose, shall be the Official Liquidator attached to the District Court.
(2) All references to the “Official Liquidator” in this Act shall be construed as references to the Official Liquidator referred to in clause (a) or clause (b), as the case may be, of sub-section
(1).
Official Liquidator to be liquidator. 449. Official Liquidator to be liquidator.-On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.
Appointment and powers of provisional liquidator.
450. Appointment and powers of provisional liquidator.- (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official liquidate or to be liquidator provisionally.
(2) Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.
(3) Where a provisional liquidator Is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.
(4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made.
General provisions as to liquidators.
451. General provisions as to liquidators.-(1) The liquidator shall conduct the proceedings in winding up the company and perform such ‘duties in reference thereto as the Court may impose.
(2) Where the Official Liquidator becomes or acts as liquidator, there shall be paid to the Central Government out of the assets of the company such fees as may be prescribed.
(3) The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification: 252 Provided that nothing in this sub-section shall be deemed to give validity to acts done ‘by a liquidator after his appointment has been shown to be invalid.
Style, etc., of liquidator. 452. Style, etc., of liquidator.-A liquidator shall be described by the style of “The Official Liquidator” of the particular company in respect of which he acts, and not by his individual name.
Receiver not to be appointed of assets with liquidator. 453. Receiver not to be appointed of assets with liquidator.A receiver shall not be appointed of assets in the hands of a liquidator except by, or with the leave of, the Court.
Statement of affairs to be made to Official Liquidator. 454. Statement of affairs to be made to Official
Liquidator.—(1) Where the Court has made a winding up order or appointed the Official Liquidator as provisional liquidator, unless the Court in its discretion otherwise orders, there shall be made out and submitted to the Official Liquidator a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely:- (a) the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company; (b) its debts and liabilities; (c) the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts; and in the case of secured debts, particulars of the securities given, whether by the company or an officer thereof, their value and the dates on which they were given; (d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised on account thereof; (e) such further or other information as may be prescribed, or as the Official Liquidator may require.
(2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the Official Liquidator, subject to the direction of the Court, may require to submit and verify the ,statement, that is to say, persons- (a) who are or have been officers of the company; (b) who have taken part in the formation of the company at any time within one year before the relevant date; (c) who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the Official Liquidator, capable of giving the information required. (d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates. 253
(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Court may, for special reasons, appoint.
(4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the Official Liquidator or provisional liquidator, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the Official Liquidator may consider reasonable, subject to an appeal to the Court.
(5) If any person, without reasonable excuse, makes, default in complying with any of the requirements of this section, he shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.
(6) 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 inspect the statement submitted in pursuance of this section, and to a copy thereof or extract therefrom.
(7) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code (Act 45 of 1860); and shall, on the application of the Official Liquidator, be punishable accordingly.
(8) In this section, the expression “the relevant date” means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding up order.
Report by Official Liquidator.
455. Report by Official Liquidator.-(1) In a case where a winding up order is made, the Official Liquidator shall, as soon as practicable after receipt of the statement to be submitted under section 454 and not later than six months from the date of the order, or in a case where the Court orders that no statement need be submitted, as soon as practicable after the date of the order, submit “a preliminary report to the Court- (a) to the amount of capital issued. subscribed, and said up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories; (iii) debts due to the company and securities, if any, available in respect thereof; (iv) movable and immovable properties belonging to the company; and (v) unpaid calls; (b) if the company has failed, as to the causes of the failure; and (c) whether, in his opinion, further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of the business thereof. 254
(2) The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the for- mation thereof, and any other matters which, in his opinion, it is desirable to bring to the notice of the Court.
(3) If the Official Liquidator states in any such further report that in his opinion a fraud has been committed as aforesaid, the Court shall have the further powers provided in section 478.
Custody of company’s property.
456.Custody of company’s property.-(1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled.
(2) All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.
Powers of liquidator.
457. Powers of liquidator.-(1) The liquidator in a winding up by the Court shall have power, with the sanction of the Court,- (a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company; (b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company; (c) to sell the immovable and movable property and action- able claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; (d) to raise on the security of the assets of the company any money requisite; (e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.
(2) The liquidator in a winding up by the Court shall have power- (i) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company’s seal; (ii) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors; (iii) to draw, accept, make and indorse any bill of exchange, hundi or promissory note in the name and on behalf of the 255 company, with the same effect with respect to the liability of the company as if the bill, hundi, or note had been drawn, accepted, made or indorsed by or on behalf of the company in the course of its business; (iv) to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself:] Provided that nothing herein empowered shall be deemed to affect the rights, duties and privileges of any Administrator General; (v) to appoint an agent to do any business which the liqui- dator is unable to do himself.
(3) The exercise by the liquidator in a winding up by the Court of the powers conferred by this section shall be subject to the control of the Court; and any creditor or contributory may apply to the Court with respect to the exercise or proposed exercise of any of the powers conferred by this section.
Discretion of liquidator. 458. Discretion of liquidator.-The Court may, by order, provide that the liquidator may exercise any of the powers referred to in sub-
section (1) of section 457 without the sanction or intervention of the Court: Provided always that the exercise by the liquidator of such powers shall be subject to the control of the Court.
Provision for legal assistance to liquidator. 459. Provision for legal assistance to liquidator.-The liquidator may, with the sanction of the Court, appoint an advocate, attorney or pleader entitled to appear before the Court to assist him in the performance of his duties.
Exercise and control of liquidators powers.
460. Exercise and control of liquidators powers.-(1) Subject to the provisions of this Act, the liquidator shall, in the administration of the assets of the company and the distribution thereof among its creditors, have regard to any directions which may be given by resolution of the creditors or contributories at any general meeting or by the committee of inspection.
(2) Any directions given by the creditors or contributories at any general meeting shall, in case of conflict, be deemed to override any directions given by the committee of inspection.
(3) The liquidator- (a) may summon general meetings of the creditors or con. tributaries, whenever he thinks fit, for the purpose of ascertaining their wishes; (b) shall summon such meetings at such times as the creditors or contributories, as the case may be, may, by resolution, direct, or whenever requested in writing to do so by not less than one-tenth in value of the creditors or contributories, as the case may be. 256
(4) The liquidator may apply to the Court in the manner pres- cribed, if any, for directions in relation to any particular matter arising in the winding up.
(5) Subject to the provisions of this Act, the liquidator shall use his own discretion in the administration of the assets of the company and in the distribution thereof among the creditors.
(6) Any person aggrieved by any act or decision of the liquidator may apply to the Court; and the Court may confirm, reverse or modify the act or decision complained of, and make such further order as it thinks just in the circumstances.
Books to be kept by liquidator.
461.Books to be kept by liquidator.-(1) The liquidator shall keep, in the manner prescribed, proper books in which he shall cause entries or minutes to be made of proceedings at meetings and of such other matters as may be prescribed.
(2) Any creditor or contributory may, subject. to the control of the Court, inspect any such books, personally or by his agent.
Audit of liquidators accounts.
462. Audit of liquidators accounts.-(1) The liquidator shall, at such times as may be prescribed but not less. than twice in each year during his tenure of office, present to the Court an account of his receipts and payments as liquidator.
(2) The account shall be in the prescribed form, shall be made in duplicate, and shall be verified by a declaration in the prescribed form.
(3) The Court shall cause the account to be audited in such manner as it thinks fit; and for the purpose of the audit, the liquidator shall furnish the Court with such vouchers and information as the Court may require, and the Court may, at any time, require-the production of, and inspect, any books or accounts kept by the liquidator.
(4) When the account has been audited, one copy thereof shall be filed and kept by the Court, and the other copy shall be delivered to the Registrar for filing; and each copy shall be open to the inspection of any creditor, contributory or person interested.
(5) The liquidator shall cause the account when audited or a summary thereof to be printed, and shall send a printed copy of the account or summary by post to every creditor and to every contributory: Provided that the Court may in any case dispense with compliance with this sub-section.
Control of Central Government over liquidators.
463. Control of Central Government over liquidators.-(1) The Central Government shall take cognisance of the conduct of liquidators of companies which are being wound up by the Court, and, if a liquidator does not faithfully perform his duties and duly observe all the requirements imposed on him by this Act, the rules thereunder, or otherwise, with respect to the performance of his duties, or if any complaint is made to the Central Government by any creditor or contributory in regard thereto, the Central Government shall inquire into the matter, and take such action thereon as it may think expedient 257
(2) The Central Government may at any time require any liqui- dator of a company which is being wound up by the Court to answer any inquiry in relation to any winding up in which he is engaged,, and may, if the Central Government thinks fit, apply to the Court to examine him or any other person on oath concerning the winding up.
(3) The Central Government may also direct a local investigation to be made of the books and vouchers of the liquidators. Committee of inspection
Appointment and composition of committee of inspection.
464. Appointment and composition of committee of inspection.- (1) The liquidator shall, within two months from the date of the order for the winding up of a company, convene a meeting of its creditors (as ascertained from its books and documents) for the purpose of determining whether or not a committee of inspection shall be appointed to act with the Liquidator, and who are to be members of the committee, if one is appointed.
(2) The liquidator shall, within fourteen days from the date of the- creditors meeting or such further time as the Court in its dis- cretion may grant for the purpose, convene a meeting of the Contri- butories to consider the decision of the creditors’ meeting and to ex- press the views of the contributories on the matters specified in sub-
section (1); and it shall be open to the meeting to accept the decision of the creditors’ meeting with or without modifications or to reject it.
(3) Except in the case where the meeting of the contributories accepts the decision of the creditors’ meeting in its entirety, it shall be the duty of the liquidator to apply to the Court for directions as to whether there shall be a committee of inspection; and, if so, what the composition of the committee shall be, and who shall be members thereof.
Constitution and proceedings of committee of inspection. 465. Constitution and proceedings of committee of inspection.-
(1) A committee of inspection appointed in pursuance of section 464 shall consist of not more than twelve members, being creditors and contributories of the company or persons holding general or special powers of attorney from creditors or contributories, in such propor- tions as may be agreed on by the meetings of creditors and contribu- tories, or in case of difference of opinion between the meetings, as may be determined by the Court.
(2) The committee of inspection shall have the right to inspect the accounts of the liquidator at all reasonable times.
(3) The committee shall meet at such times at it may from time to time appoint, and, failing such appointment, at least once a month, and the liquidator or any member of the committee may also call a meeting of the committee as and when he thinks, necessary.
(4) The quorum for a meeting of the committee shall be one-third of the total number of the members, or two, whichever is higher.
(5) The committee may act by a majority of its members present at a meeting, but shall not act unless a quorum is present.
(6) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator. 258
(7) If a member of the committee is adjudged an insolvent, or compounds or arranges with his creditors, or is absent from five consecutive meetings of, the committee without the leave of those members who, together with himself, represent the creditors or con- tributories, as the case may be, his office shall become vacant.
(8) A member of the committee may be removed at a meeting of creditors if he represents creditors, or at a meeting of contribu- tories if he represents contributories, by an ordinary resolution of which seven days’ notice has been given, stating the object of the meeting.
(9) On a vacancy occurring in the committee, the liquidator shall forthwith summon a meeting of creditors or of contributories, as the case may require,. to fill the vacancy; and the meeting may, by resolution, re-appoint the same, or appoint another, creditor or contributory to fill the vacancy: Provided that if the liquidator, having regard to the position in the winding up, is of the opinion that it is unnecessary for the vacancy to be filled, he may apply to the Court and the Court may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order.
(10) The continuing members of the committee, if not less, than two, may act notwithstanding any vacancy in the committee. General powers of Court in case of winding up by Court
Power of Court to stay winding up.
466. Power of Court to stay winding up.-(1) The Court may at any Official Liquidator or of any creditor or contributory, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, make an order staying the proceedings, either altogether or for a limited time, on such terms and conditions as the Court thinks fit.
(2) On any application under this section, the Court may, before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.
(3) A copy of every order made under this section shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.
Settlement of list of contributories and application of assets. 467. Settlement of list of contributories and application of
assets.- (1) As soon as may be after making a winding up order, the Court shall settle a list of contributories, with power to rectify the register of members in all cases where rectification is required in pursuance of this Act, and shall cause the assets of the company to be collected and applied in discharge of its liabilities: Provided that, where it appears to the Court that it will not be necessary to make calls on, or adjust the rights of, contributories, the Court may dispense with the settlement of a list of contributories.
(2) In settling the list of contributories, the Court shall distinguish between those who are contributories in their own right and those who are contributories as being representatives of, or liable for the debts of, others. 259
Delivery of property to liquidator. 468. Delivery of property to liquidator.-The Court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, or officer of the company, to pay, deliver, surrender or transfer forthwith, or within such time as the Court directs, to the liquidator, any money, property or books and papers in his hands to which the company is prima facie entitled.
Payment of debts due by contributory and extent of set-off. 469. Payment of debts due by contributory and extent of set-off
(1) The Court may, at any time after making a winding up order, make an order on any contributory for the time being on the list of contributories to pay, in the manner directed by the order, any money due to the company, from him or from the estate of the person whom he represents, exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.
(2) The Court, in making such an order, may- (a) in the case of an unlimited company, allow to the con- tributory, by way of set-off, any money due to him or to the estate which he represents, from the company, on any indepen- dent dealing or contract with the company, but not any money due to him as a member of the company in respect of any divi- dend or profit ; and (b) in the case of a limited company, make to any director, managing agent, secretaries and treasurers or manager whose liability is unlimited, or to his estate, the like allowance.
(3) In the case of any company, whether limited or unlimited, when all the creditors have been paid in full, any money due on any account whatever to a Contributory from the company may be allowed to him by way of set-off against any subsequent call.
Power of Court to make calls.
470. Power of Court to make calls.-(1) The Court may, at any time after making a winding up order, and either before or after it has ascertained the sufficiency of the assets of the company,- (a) make calls on all or any of the contributories for the time being on the list of the contributories, to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company, and the. costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories. among themselves; and (b) make an order for payment of any calls so made.
(2) In making a call, the Court may take into consideration the probability that some of the contributories may, partly or wholly, fail to pay the call.
Payment into bank of moneys due to company.
471.Payment into bank of moneys due to company.-(1) The Court may order any contributory, purchaser or other person from whom any money is due to the company to pay the money into the public account of India in the Reserve Bank of India instead of to the liquidator.
(2) Any such order may be enforced in the same manner as if the Court had directed payment to the liquidator. 260
Moneys and securities paid into Bank to be subject to order of Court. 472. Moneys and securities paid into Bank to be subject to order of Court.-All moneys, bills, hundis, notes and other securities paid or delivered into the Reserve Bank of India in the course of the winding up of a company by the Court, shall be subject in all respects to the orders of the Court.
Order on contributory to be conclusive evidence.
473.Order on contributory to be conclusive evidence–(1) An order made by the Court on a contributory shall, subject to any right of appeal., be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due.
(2) All other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings whatsoever.
Power to exclude creditors not proving in time. 474. Power to exclude creditors not proving in time.-The Court may fix a time or times within which creditors are to prove their debts or claims, or to be excluded from the benefit of any distribu- tion made before those debt. or claims are proved.
Adjustment of rights of contributories. 475. Adjustment of rights of contributories.-The Court shall adjust the rights of the contributories among themselves, and distri- bute any surplus among the persons entitled thereto.
Power to order costs. 476. Power to order costs.–The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up in such order of priority inter se as the Court thinks just
Power to summon persons suspected of having property of company, etc. 477.Power to summon persons suspected of having property of
company, etc.- (1) The Court may, at any time after the appointment of a provisional liquidator or the making of a winding up order, summon before it any officer of the company or person known or suspected to have in his possession any property or books or papers, of the company, or known or suspected to be indebted to the company, or any person whom the Court deems capable of giving information concerning the promotion, formation, trade, dealings, property, books or papers, or affairs of the company.
(2) The Court may examine any officer or person so summoned on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories; and may, in the former case, reduce his answers to writing and require him to sign them.
(3) The Court may require any officer or person so summoned to produce any books and papers in his custody or power relating to the company; but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien. and the Court shall have jurisdiction in the winding up to determine all questions relating to that lien.
(4) If any officer or person so summoned, after being paid or tendered a reasonable sum for his expenses, fails to appear before 261 the Court at the time appointed, not having a lawful impediment (made known to the Court at the time of its sitting and allowed by it), the Court may cause him to be apprehended and brought before the Court for examination.
Power to order public examination of promoters, directors etc. 478. Power to order public examination of promoters, directors
etc.-(1) When an order has been made for winding up a company by the Court, and the Official Liquidator has made a report to the Court under this Act, stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as an officer thereof.
(2) The Official Liquidator shall take part in the examination, and for that purpose may, if specially authorised by the Court in that behalf, employ such legal assistance as may be sanctioned by the Court.
(3) Any creditor or contributory may also take part in the exa- mination either personally or by any advocate, attorney or pleader entitled to appear before the Court.
(4) The Court may put such questions to the person examined as it thinks fit.
(5) The person examined shall be examined on oath, and shall answer all such questions as the Court may put, or allow to be put, to him.
(6) A person ordered to be examined under this section- (a) shall, before his examination, be furnished at hi’s own cost with a copy of the Official Liquidator’s report; and (b) may at his own cost employ an advocate, attorney or pleader entitled to appear before the Court, who shall be at liberty to put to him such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answers given by him.
(7) (a) If any such person applies to the Court to be exculpated from any charges made or suggested against him, it shall be the duty of the Official Liquidator to appear on the hearing of the application and call the attention of the Court to any matters which appear to the Official Liquidator to be relevant. (b) If the Court, after hearing any evidence given or witnesses called by the Official Liquidator, grants the application, the Court may allow the applicant such costs as it may think fit.
(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined; and may thereafter be used in evidence against him, and shall be open to the inspection of any creditor or contributory at all reasonable times. 262
(9) The Court may, if it thinks fit, adjourn the examination from time to time.
(10) An examination under this section may, if the Court so directs and subject to any rules made in this behalf, be held before any District Judge, or before any officer of the High Court, being an Official Referee, Master, Registrar or Deputy Registrar.
(11) The powers of the Court under this section as to the conduct of the examination, but not as to costs, may be exercised by the judge or officer before whom the examination is held in pursuance of
subsection (10).
Power to arrest absconding contributory. 479.Power to arrest absconding contributory.-At any time either before or after making a winding up order, the Court may, on proof of probable cause for believing that a contributory is about to quit India or otherwise to abscond, or is about to remove or conceal any of his property, for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, cause- (a) the contributory to be arrested and safely kept until such time as the Court may order ; and (b) his books and papers and movable property to be seized and safely kept until such time as the Court may order.
Saving of existing powers of Court. 480. Saving of existing powers of Court.-Any powers conferred on the Court by this Act shall be in addition to, and not in derogation of, any existing powers of instituting proceedings against any contributory or debtor of the company, or the estate of any contri- butory or debtor, for the recovery of any call or other sums.
Dissolution of company.
481. Dissolution of company.-(1) When the affairs of a company have been completely wound up, the Court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.
(2) A copy of the order shall, within fourteen days from the date thereof, be forwarded by the liquidator to the Registrar who shall make in his books a minute of the dissolution of the company.
(3) If the liquidator makes default in forwarding a copy as aforesaid, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Enforcement of and appeal from orders
Order made in any Court to be enforced by other Courts. 482. Order made in any Court to be enforced by other Courts.Any order made by a Court for, or in the course of, winding up a company shall be enforceable at any place in India, other than that over which such Court has jurisdiction, by the Court which would have had jurisdiction in respect of the company if its registered Office had been situate at such other place, and in the same manner in all respects as if the order had been made by that Court. 263
Appeals from orders. 483. Appeals from orders.-Appeals from any order made, or decision given, in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary jurisdiction. CHAP VOLUNTARY WINDING UP. CHAPTER III.-VOLUNTARY WINDING UP Resolutions for, and commencement of, voluntary winding up
Circumstances in which company may be wound up voluntarily. 484. Circumstances in which company may be wound up voluntarily.-
(1) A company may be wound Voluntarily- (a) when the period, if any, fixed for the duration of the company by the articles has expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound up voluntarily; (b) if the company passes a special resolution that the company be wound up voluntarily.
(2) In this Act, the expression “a resolution for voluntary winding up” means a resolution passed under clause (a) or (lb) of sub-
section (1).
Publication of resolution to wind up voluntarily.
485.Publication of resolution to wind up voluntarily.-(1) When a company has passed a resolution for voluntary winding up, it shall, within fourteen days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.
(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this sub-section, a liquidator of the company shall be deemed to be an officer of the company.
Commencement of voluntary winding up. 486. Commencement of voluntary winding up.-A voluntary winding up shall he deemed to commence at the time when the resolution for voluntary winding up is passed. Consequences of voluntary winding up
Effect of voluntary winding up on status of company. 487. Effect of voluntary winding up on status of company.-In the case of a voluntary winding up, the company shall, from the commencement of the winding up, cease to carry or) its business, except so far as may be required for the beneficial winding up of such business: Provided that the corporate state and corporate powers of the company shall continue until it is dissolved, 264 Declaration of solvency
Declaration of solvency in case of proposal to wind upvoluntarily. 488. Declaration of solvency in case of proposal to wind up
voluntarily.-(1) Where it is proposed to wind up a company voluntarily, its directors, or in case the company has more than two directors, the majority of the directors, may, at a meeting of the Board, make a declaration verified by an affidavit, to the effect that they have made a full inquiry into the affairs of the company, and that, having done so, they have formed the opinion that the company has no debts, or that it will be able to pay its debts in full within such period not exceeding three years from the commencement of the winding up as may be specified in the declaration.
(2) A declaration made as aforesaid shall have no effect for the purposes of this Act, unless- (a) it is made within the five weeks immediately preceding the date of the passing of the resolution for winding up the. company and is delivered, to the Registrar for registration before that date; and (b) it embodies a statement of the company’s assets arm liabilities as at the latest practicable date before the making of the declaration.
(3) Any director of a company making a declaration under this section without having reasonable grounds for the 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 for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.
(4) If the company is wound up in pursuance of a resolution passed within the period of five weeks after the making of the decla- ration, but its debts are not paid or provided for in full within the period specified in the declaration, it shall be presumed, until the contrary is shown, that the director did not have reasonable grounds for his opinion.
(5) A winding up in the case of which a declaration has been made and delivered in accordance with this section is in this Act referred to as “a members’ voluntary winding up”; and a winding up in the case of which a declaration has not been so made and delivered is in this Act referred to as “a creditors’ voluntary winding up”. Provisions applicable to a members’ voluntary winding up
Provisions applicable-to a members’ voluntary winding up. 489. Provisions applicable-to a members’ voluntary winding up.The provisions contained in sections 490 to 498, both inclusive, shall subject to the provisions of section 498, apply in relation to a mem- bers’ voluntary winding up.
Power of company to appoint and fix remuneration of liquidators. 490.Power of company to appoint and fix remuneration of liqui-
dators.-(1) The company in general meeting shall- (a) appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company; and 265 (b) fix the remuneration, if any, to be paid to the liquidator or liquidators.-
(2) Any remuneration so fixed shall not be increased in any cir- cumstances whatever, whether with or without the sanction of the Court.
(3) Before the remuneration of the liquidator or liquidators is fixed as aforesaid, the liquidator, or any of the liquidators, as the case may be, shall not take charge of his office.
Board’s powers to cease on appointment of liquidator. 491. Board’s powers to cease on appointment of liquidator.On the appointment of a liquidator, all the powers of the Board of directors and of the managing or whole-time directors, managing agent, secretaries and treasurers, and manager, if there be any of these, shall cease, except for the purpose of giving notice of such ap- pointment to the Registrar in pursuance of section 493 or in so far as the company in general meeting or the liquidator may sanction the continuance thereof.
Power to fill vacancy in office of liquidator.
492. Power to fill vacancy in office of liquidator.-(1) If a vacancy occurs by death, resignation or otherwise in the office of any liquidator appointed by the company, the company in general meeting may, subject to any arrangement with its creditors , fill the vacancy,
(2) For that purpose, a general meeting may be convened by any contributory, or by the continuing liquidator or liquidators, if any.
(3) The meeting shall be held in the manner provided by this Act or by the articles, or in such other manner as the Court may, on application by any contributory or by the continuing liquidator or liquidators, determine.
Notice of appointment of liquidator to be given to Registrar. 493. Notice of appointment of liquidator to be given to
Registrar.–(1) The company shall give notice to the Registrar of the appointment of a liquidator or liquidators made by it under section 490, of every vacancy occurring in the office of liquidator, and of the name of the liquidator or liquidators appointed to fill every such vacancy under section 492.
(2) The notice aforesaid shall be given by the company within ten days of the event to which it relates.
(3) If default is made in complying with subsection (1) or (2), the company, and every officer of the company (including every liquidator or continuing liquidator) who is in default, shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.
Power of liquidator to accept shares, etc., as consideration for saleof property of company. 494. Power of liquidator to accept shares, etc., as consideration
for sale of property of company.-(1) Where-. (a) a company (in this section called “the transferor com- pany”) is proposed to be, or is in course of being, wound up altogether voluntarily; and (b) the whole or any part of its business or property is proposed to be transferred or sold to another company, whether 266 a company within the meaning of this Act or not (in this section called “the transferee company”); the liquidator of the transferor company may, with the sanction of a special resolution of that company conferring on the liquidator either a general authority or an authority in respect of any particular arrangement,- (i) receive, by way of compensation or part compensation for the transfer or sale, shares, policies, or other like interests in the transferee company, for distribution among the members of the transferor company; or (ii) enter into any other arrangement whereby the members of the transferor company may, in lieu of receiving cash, shares, policies, or other like interests or in addition thereto, participate in the profits of, or receive any other benefit from, the transferee company.
(2) Any sale or arrangement in pursuance of this section shall be binding on the members of the transferor company.
(3) If any member’ of the transferor company who did not vote in favour of the special resolution expresses his dissent therefrom in writing addressed to the liquidator and left at the registered office of the company within seven days after the passing of the resolution, he may require the liquidator either- (a) to abstain from carrying the resolution into effect; or (b) to purchase his interest at a price to be determined by agreement, or by arbitration in the manner provided by this section.
(4)If the liquidator elects to purchase the member’s interest, the purchase money shall be paid before the company is dissolved, and be raised by the liquidator in such manner as may be determined by special resolution.
(5) A special resolution shall not be invalid for the purposes of this section by reason only that it is passed before or concurrently with a resolution for voluntary winding up or for appointing liquidators; but if an order is made within a year for winding up the company by or subject to the supervision of the Court, the special resolution shall not be valid unless it is sanctioned by the Court.
(6) The provisions of the Arbitration Act, 1940 (10 of 1940), other than those restricting the application of that Act in respect of the subject matter of the arbitration, shall apply to all arbitrations in pursuance of this section.
Duty of liquidator to call creditors’ meeting in case of insolvency.- 495. Duty of liquidator to call creditors’ meeting in case of
insolvency.-(1) If, in the case of a winding up commenced after the commencement of this Act, the liquidator is at any time of opinion that the company will not be able to pay its debts in full within the period stated in the declaration under section 488, or that period has expired without the debts having been paid in full, he shall forthwith summon a meeting of the creditors, and shall lay before the meeting a statement of the assets and liabilities of the Company.
(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to five hundred rupees. 267
Duty of liquidator to call general meeting at end of each year. 496. Duty of liquidator to call general meeting at end of each
year. (1) Subject to the provisions of section 498, in the event of the winding up continuing for more than one year, the liquidator shall- (a)call a general meeting of the company at the end of this first year from the commencement of the winding up, and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Central Government may allow; and (b) lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement In the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the liquidation.
(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend to one hundred rupees.
Final meeting and dissolution.
497. Final meeting and dissolution. (1) Subject to the provisions of section 498, as soon as the affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and (b) call a general meeting of the company for the purpose of laying the account before it, and giving any explanation thereof.
(2) The meeting shall be called by advertisement- (a) specifying the time, place and object of the meeting; and (b)published not less than one month before the meeting in the Official Gazette, and also in some newspaper circulating in the district where the registered office of the company is situate.
(3) Within one week after the meeting, the liquidator shall send to the Registrar a copy of the account, and shall make a return to him of the holding of the meeting and of the date thereof. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
(4) If a quorum is not present at the meeting aforesaid, the liquidator shall, in lieu of the return referred to in sub-section
(3), make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date
fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall be deemed to have been complied with.
(5) The Registrar, on receiving the account and either the
return mentioned in sub-section (3) or the return mentioned in sub-
section (4), shall forthwith register them and on the expiration of three months from such registration, the company shall be deemed to be dissolved: Provided that the Court may, on the application of the liquidator or of any other person who appears to the Court to be interested. 268 make an order deferring the date at which the dissolution of the company is to take effect, for such time as the Court thinks fit.
(6) It shall be the duty of the person on whose application an order of the Court under the foregoing proviso is made, within twenty- one days after the making of the order, to deliver to the Registrar a certified copy of the order for registration, and if that person fails so to do, he shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.
(7) If the liquidator fails to call a general meeting of the company as required by this section, he shall be punishable with fine which may extend to five hundred rupees.
Alternative provisions as to annual and final meetings in case ofinsolvency. 498. Alternative provisions as to annual and final meetings in case of insolvency. Where section 495 has effect, sections 508 and 509 shall apply to the winding up, to the exclusion of sections 496 and 497, as if the winding up were a creditors voluntary winding up and not a members’ voluntary winding up: Provided that the liquidator shall not be required to call a meeting of creditors under section 508 at the end of the first year from the commencement of the winding up, unless the meeting held under section 495 has been held more than three months before the end of that year. Provisions applicable to a creditors’ voluntary winding up
Provisions applicable to a creditors’ voluntary winding up. 499. The provisions contained in sections 500 to 509, both inclusive, shall apply in relation to a creditors’ voluntary winding up.
Meeting of creditors.
500. Meeting of creditors.-(1) The company shall cause a meeting of the creditors of the company to be called for the day, or the day next following the day, on which there is to be held the general meeting of the company at which the resolution for voluntary winding up is to be proposed, and shall cause notices of the meeting of creditors to be sent by post to the creditors simultaneously with the sending of the notices of the meeting of the company.
(2) The company shall cause notice of the meeting of the creditors to be advertised once at least in the Official Gazette and once at least in two newspapers circulating in the district where the registered office or principal place of business of the company is situate.
(3) The Board of directors of the company shall- (a) cause a full statement of the position of the company’s affairs together with a list of the creditors of the company and the estimated amount of their claims to be laid before the meeting of the creditors to be held as aforesaid; and (b) appoint one of their number to preside at the said meeting.
(4) It shall be the duty of the director appointed to preside at the meeting of creditors to attend the meeting and preside thereat.
(5) If the meeting of the company at which the resolution for voluntary winding up is to be proposed is adjourned and the resolution s passed at an adjourned meeting, any resolution passed at 269
the meeting of the creditors held in pursuance of sub-section (1) shall have effect as if it had been passed immediately after the passing of the resolution for winding up the company.
(6) If default is made-
(a) by the company, in complying with sub-sections (1) and
(2); (b) by its Board of directors, in complying with sub-
section (3); (c) by any director of the company, in complying with sub-
section (4); the company, each of the directors, or the director, as the case may be, shall be punishable with fine which may extend to one thousand rupees and, in the case of default by the company, every officer of the company who is in default, shall be liable to the like punishment.
Notice of resolutions passed by creditors’ meeting to be given toRegistrar. 501. Notice of resolutions passed by creditors’ meeting to be
given to Registrar. (1) Notice of any resolution passed at a creditors’ meeting in pursuance of section 500 shall be given by the company to the Registrar within ten days of the passing thereof.
(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. For the purposes of this section, a liquidator of the company shall be deemed to be an officer of the company.
Appointment of liquidator.
502. Appointment of liquidator.-(1) The creditors and the company at their respective meetings mentioned in section 500 may nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company.
(2) If the creditors and the company nominate different persons, the person nominated by the creditors shall be liquidator: Provided that any director, member or creditor of the company may, within seven days after the date on which the nomination was made by the creditors, apply to the Court for an order either directing that the person nominated as liquidator by the company shall be liquidator instead of or jointly with the person nominated by the creditors, or appointing the Official Liquidator or some other person to be liquidator instead of the person appointed by the creditors.
(3) If no person is nominated by the creditors, the person, if any, nominated by the company shall be liquidator.
(4) If no person is nominated by the company, the person, if any, nominated by the creditors shall be liquidator.
Appointment of committee of inspection.
503. Appointment of committee of inspection.-(1) The creditors at the meeting to be held in pursuance of section 500 or at any sub- sequent meeting may, if they think fit, appoint a committee of inspec- tion consisting of not more than five persons.
(2)If such a committee is appointed, the company may, either at the meeting at which the resolution for voluntary winding up is passed or at any subsequent general meeting, appoint such number 270 of persons (not exceeding five) as they think fit to act as members of the committee: Provided that the creditors may, if they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection.
(3) If the creditors so resolve, the persons mentioned in the resolution shall not, unless the Court otherwise directs, be qualified to, act as members of the committee.
(4) On any application to the Court for a direction under sub-
section (3), the Court may, if it thinks fit, appoint other persons to act as members of the committee of inspection in the place of the persons mentioned in the creditors’ resolution.
(5) Subject to the provisions of sub-sections (1) to (4) and to such rules as may be made by the Central Government, the provisions of
section 465 (except sub-section (1) thereof) shall apply with respect to a committee of inspection appointed under this section as they apply with respect to a committee of inspection appointed in a winding up by the Court.
Fixing of liquidator’s remuneration.
504. Fixing of liquidators’ remuneration.-(1) The committee of inspection, or if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator or liquidators.
(2) Where the remuneration is not so fixed, it shall be determined by the Court.
(3) Any remuneration fixed under sub-section (1) or (2) shall not be increased in any circumstances whatever, whether with or without the sanction of the Court.
Board’s powers to cease on appointment of liquidator. 505. Board’s powers to cease on appointment of liquidator.-On the appointment of a liquidator, all the powers of the Board of directors shall cease, except in so far as the committee of inspection, or if there is no such committee, the creditors in general meeting, may sanction the continuance thereof.
Power to fill vacancy in office of liquidator. 506. Power to fill vacancy in office of liquidator.-If a vacancy occurs by death, resignation or otherwise, in the office of a liquidator (other than a liquidator appointed by, or by the direction of, the Court), the creditors in general meeting may fill the vacancy.
Application of section 494 to a creditors’ voluntary winding up. 507. Application of section 494 to a creditors’ voluntary winding up.-The provisions of section 494 shall apply in the case of a creditors’ voluntary winding up as in the case of a members’ voluntary winding up, with the modification that the powers of the liquidator under that section shall not be exercised except with the sanction either of the Court or of the committee of inspection.
Duty of liquidator to call meetings of company and of creditors at endof each year. 508. Duty of liquidator to call meetings of company and of
creditors at end of each year.-(1) In the event of the winding up continuing for more than one year, the liquidator shall- (a) call a general meeting of the company and a meeting of the creditors at the end of the first year from the commence- ment of the winding up and at the end of each succeeding year, or as soon thereafter as may be convenient within three months 271 from the end of the year or such longer period as the Central Government may allow; and (b) lay before the meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in, and position of, the winding up.
(2) If the liquidator fails to comply with sub-section (1), he shall be punishable, in respect of each failure, with fine which may extend to one hundred rupees.
Final meeting and dissolution.
509. Final meeting and dissolution.-(1) As soon as the affairs of the company are fully wound up, the liquidator shall- (a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and (b) call a general meeting of the company and a meeting of the creditors for the purpose of laying the account before the meetings and giving any explanation thereof.
(2) Each such meeting shall be called by advertisement- (a) specifying the time, place and object thereof; and (b) published not less than one month before the meeting in the Official Gazette and also in some newspaper circulating in the district where the registered office of the company is situate.
(3) Within one week after the date of the meetings, or if the meetings are not held on the same date, after the date of the later meeting, the liquidator shall send to the Registrar a copy of the account, and shall make a return to him of the holding of the meetings and of the date or dates on which they were held. If the copy is not so sent or the return is not so made, the liquidator shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
(4) If a quorum (which for the purposes of this section shall be two persons) is not present at either of such meetings, the liquidator
shall, in lieu of the return referred to in sub-section (3), make a return that the meeting was duly called and that no quorum was present thereat. Upon such a return being made within one week after the date
fixed for the meeting, the provisions of sub-section (3) as to the making of the return shall, in respect of that meeting, be deemed to have been complied with.
(5) On receiving the account and also, in respect of each such
meeting, either the return mentioned in sub-section (3) or the return
mentioned in sub-section (4), the Registrar shall forthwith register them, and on the expiration of three months from their registration, the company shall be deemed to be dissolved: Provided that the Court may, on the application of the liquidator or of any other person who appears to the Court to be interested, make 272 an order deferring the date at which the dissolution of the company is to take effect for such time as the Court thinks fit.
(6) It shall be the duty of the person on whose application an order is made by the Court under the foregoing proviso, within twenty- one days after the making of the order, to deliver to the Registrar a certified copy of the order for registration, and if that person fails so to do, he shall be punishable with fine which may extend to one hundred rupees for every day during which the default continues.
(7) If the liquidator fails to call a general meeting of the company or a meeting of the creditors as required by this section, he shall be punishable, in respect of each such failure, with fine which may extend to five hundred rupees. Provisions applicable to every voluntary winding up
Provisions applicable to every voluntary winding up. 510.Provisions applicable to every voluntary winding up.-The provisions contained in sections 511 to 521, both inclusive, shall apply to every voluntary winding up, whether a members’ or a creditors’ winding up.
Distribution of property of company. 511. Distribution of property of company.-Subject to the pro- visions of this Act as to preferential payments, the assets of a com- pany shall, on its winding up, be applied in satisfaction of its liabilities pari passu and, subject to such application, shall, unless the articles otherwise provide, be distributed among the members according to their rights and interests in the company.
Powers and duties of liquidator in voluntary winding up.
512. Powers and duties of liquidator in voluntary winding up.-(1) The liquidator may,- (a) in the case of a members’ voluntary winding up, with sanction of a special resolution of the company, and in the case of a creditors’ voluntary winding up, with the sanction of the Court or, the committee of inspection or, if there is no such committee, of a meeting of the creditors, exercise any of the powers given by clauses (i) to (iv) of sub-section
(2) of section 457 to a liquidator in a winding up by the Court; (b) without the sanction referred to in clause (a), exercise any of the other powers given by this Act to the liquidator in a winding up by the Court; (c) exercise the power of the Court under this Act of settling a list of contributories (which shall be prima facie evidence of the liability of the persons named therein to be contributories); (d) exercise the power of the Court of making calls; (e) call general meetings of the company for the purpose of obtaining the sanction of the company by ordinary or special resolution, as the case may require, or for any other purpose be may think fit. 273
(2) The. exercise by the liquidator of the powers given by
clause (a) of subsection (1) shall be subject to the control of the Court; and any creditor or contributory may apply to the Court with respect to any exercise or proposed exercise of any of the powers conferred by this section.
(3) The liquidator shall pay the debts of the company and shall adjust the rights of the contributories among themselves.
(4) When several liquidators are appointed, any power given by this Act may be exercised by such one or more of them as may be determined at the time of their appointment, or, in default of such determination, by any number of them not being less than two.
Body corporate not to be appointed as liquidator.
513. Body corporate not to be appointed as liquidator.-(1) A body corporate shall not be qualified for appointment as liquidator of a company in a voluntary winding up.
(2) Any appointment made in contravention of sub-section (1) shall be void.
(3) Any body corporate which acts as liquidator of a company, and every director, the managing agent or secretaries and treasurers, or a manager thereof, shall be punishable with fine which may extend to one thousand rupees.
Corrupt inducement affecting appointment as liquidator. 514. Corrupt inducement affecting appointment as liquidator.Any person who gives, or agrees or offers to give, to any member or creditor of a company any gratification, whatever with a view to– (a) securing his own appointment or nomination as the com- pany’s liquidator; or (b) securing or preventing the appointment or nomination of some person other than himself, as the company’s liquidator; shall be punishable with fine which may extend to one thousand rupees.
Power of Court to appoint and remove liquidator in voluntary windingup. 515. Power of Court to appoint and remove liquidator in voluntary
winding up.-(1) If from any cause whatever, there is no liquidator acting, the Court may appoint a liquidator.
(2) The Court may, on cause shown, remove a liquidator and appoint another liquidator.
Notice by liquidator of his appointment.
516. Notice by liquidator of his appointment.-(1) The liquidator shall, within twenty-one days after his appointment, publish in the Official Gazette, and deliver to the Registrar for registration, a notice of his appointment in the form prescribed.
(2) If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
Arrangement when binding on company and creditors.
517. Arrangement when binding on company and creditors.-(1) Any arrangement entered into between a company about to be, or in the course of being, wound up and its creditors shall, subject to the right of appeal under this section, be binding on the company and 274 on the creditors if it is sanctioned by a special resolution of the company and acceded to by three-fourths in number and value of the creditors.
(2) Any creditor or contributory may, within three weeks from the completion of the arrangement, appeal to the Court against it and the Court may thereupon, as it thinks just, amend, vary, confirm or set aside the arrangement.
Power to apply to Court to have questions determined or powersexercised. 518. Power to apply to Court to have questions determined or
powers exercised.-(1) The liquidator or any contributory or creditor may apply to the Court- (a) to determine any question arising in the winding up of a company; or (b) to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.
(2) The liquidator or any creditor or contributory may
apply to the Court specified in sub-section (3) for an order setting aside any attachment, distress or execution put into force against the estate or effects of the company after the commencement of the winding up.
(3) An application under sub-section (2) shall be made- (a) if the attachment, distress or execution is levied or put into force by a High Court, to such High Court; and (b) if the attachment, distress or execution is levied or put into force by any other Court, to the Court having jurisdiction to wind up the company.
(4) The Court, if satisfied on an application under sub-section
(1) or (2) that the determination of the question or the required exercise of power or the order applied for will be just and beneficial, may accede wholly or partially to the application on such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just.
(5) A copy of an order staying the proceedings in the winding up, made by virtue of this section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.
Application of liquidator to Court for public examination ofpromoters, directors, etc. 519. Application of liquidator to Court for public examination of
promoters, directors, etc.-(1) The liquidator may make a report to the Court stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since its formation; and the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as officer thereof.
(2)The provisions of sub-sections (2) to (11) of section 478 shall apply in relation to any examination directed under sub-section
(1) as they apply in relation to an examination directed under sub-
section (1) of section 478 with references to the liquidator being substituted for references to the Official Liquidator in those provi- sions. 275
Costs of voluntary winding up. 520. Costs of voluntary winding up.-All costs, charges and ex- penses properly incurred in the, winding up, including the remunera- tion of the liquidator, shall, subject to the rights of secured credi- tors if any, be payable out of the assets of the company in priority to all other claims.
Saving of right of creditors and contributories to apply for windingup. 521. Saving of right of creditors and contributories to apply for winding up.-The voluntary winding up of a company shall not bar the right of any creditor or contributory to have it wound up by the Court, but in the case of an application by a contributory, the Court must be satisfied that the rights of the contributories will be prejudiced by a voluntary winding up. CHAP WINDING UP SUBJECT TO SUPERVISION OF COURT. CHAPTER IV.–WINDING UP SUBJECT TO SUPERVISION OF COURT
Power to order winding up subject to supervision. 522. Power to order winding up subject to supervision.-At any time after a company has passed a resolution for voluntary winding up, the Court may make an order that the voluntary winding up shall continue, but subject to such supervision of the Court, and with such liberty for creditors, contributories or others to apply to the Court, and generally on such terms and conditions, as the Court thinks just.
Effect of petition for winding up subject to supervision. 523. Effect of petition for winding up subject to supervision.A petition for the continuance of a voluntary winding up subject to the supervision of the Court shall, for the purpose of giving jurisdiction to the Court over suits and legal proceedings, be deemed to be a petition for winding up by the Court.
Power of Court to appoint or remove liquidators.
524. Power of Court to appoint or remove liquidators.-(1) Where an order is made for a winding up subject to supervision, the Court may, by that or any subsequent order, appoint an additional liquidator or liquidators.
(2) The Court may remove any liquidator so appointed or any liquidator continued under the supervision order, and fill any vacancy occasioned by the removal, or by death or resignation.
Powers and obligations of liquidator appointed by Court. 525. Powers and obligations of liquidator appointed by Court.A liquidator appointed by the Court under section 524 shall have the same powers, be subject to the same obligations, and in all respects stand in the same position, as if he had been duly appointed in accordance with the provisions of this Act with respect to the appointment of liquidators in a voluntary winding up.
Effect of supervision order.
526. Effect of supervision order.-(1) Where an order is made for a winding up subject to supervision, the liquidator may, subject to any restrictions imposed by the Court, exercise all his powers, without the sanction or intervention of the Court, in the same manner as if the company were being wound up altogether voluntarily.
(2) Except as provided in sub-section (1), any order made by the Court for a winding up subject to the supervision of the Court, shall for all purposes, including the staying of suits and other pro- ceedings, be deemed to be an order’ of the Court for winding up the company by the Court, and shall confer full authority on the Court to make calls or to enforce calls made by the liquidators, and to exercise all other powers which it might have exercised if an order had been made for winding up the company altogether by the Court. 276
(3) In the construction of the provisions whereby the Court is empowered to direct any act or thing to be done to or in favour of the liquidator, the expression “liquidator” shall be deemed to mean the liquidator conducting the winding up, subject to the supervision of the Court.
Appointment in certain cases of voluntary liquidators to office ofliquidators. 527. Appointment in certain cases of voluntary liquidators to office of liquidators.-Where an order has been made for winding up a company subject to supervision, and an order is afterwards made for winding up by the Court, the Court may, by the last-mentioned or any subsequent order, appoint any person or persons who are then liquidators, either provisionally or permanently, to be liquidator or liquidators in the winding up by the Court in addition to, and subject to the control of, the Official Liquidator. CHAP PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP. CHAPTER V.-PROVISIONS APPLICABLE TO EVERY MODE OF WINDING UP Proof and ranking of claims
Debts of all descriptions to be admitted to proof. 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 against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.
Application of insolvency rules in winding up of insolvent companies. 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 future and contingent liabilities; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent.
(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.
Preferential payments.
530. Preferential payments.-(1) In a winding up, there shall be paid in priority to all other debts- (a) all revenues, taxes, cesses and rates due from the company to the Central or a State Government or to a local authority at the relevant, date as defined in clause (c) of
subsection (8), and having become due and payable within the twelve months next before that date; (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 277 to the company and due for a period not exceeding four months within the twelve months next before the relevant date,
subject to the limit specified in sub-section (2); (c) all accrued holiday remuneration becoming payable 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 before the relevant date, by the company as the employer of any persons, under the Employees’ State Insurance Act, 1948 (34 of 1948), 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 of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen’s Compensation Act) 1928 (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 of the death or disablement of any employee of the company; (f) all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees, maintained by the company; and (g) the expenses of any investigation held in pursuance of section 235 or 237, in so far as they are payable by the company.
(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: Provided that where a claimant is a labourer in husbandry who has entered into a contract for the payment of a portion of his wages in a lump sum at the end of the year of hiring, he shall have priority in respect of the whole of such sum, or a part thereof, as the Court may decide to be due under the contract, proportionate to the time of. service up to the relevant date.
(3) Where any compensation under the Workmen’s Compensation Act, 1923 (8 of 1923) is a weekly payment, the amount due in respect
thereof shall, for the purposes of clause (e) of sub-section (1), be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application 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) to him, or in the case of his death, to any other person in his right 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 a 278 right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made.
(5) The foregoing debts shall- (a) rank equally among themselves and be paid in full, Unless the assets are insufficient to meet them, in Which 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 meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to 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.
(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 of absence from work through sickness or other good cause 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; and (e) 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 appoint- ment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and 279 (ii) in any case where sub-clause (i) does not apply, the date of the passing of the resolution for the voluntary wind- ing 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 commence- ment of this Act, and in such a case. the provisions relating to pre- ferential payments which would have applied if this Act had not been passed, shall be deemed to remain in full force. Effect of winding up on antecedent and other transactions
Fraudulent preference.
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 being wound up, be deemed a fraudulent preference of its creditors and be invalid 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.
Transfers for benefit of all creditors to be void. 532. Transfers 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.
Liabilities and rights of certain fraudulently preferred persons. 533. Liabilities and rights of certain fraudulently preferred
persons.-(1) Where, in the case of a company which is being wound up, anything made, taken or done after the commencement of this Act is invalid under section 531 as a fraudulent preference of a person interested in 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 to be personally liable as surety for the debt, to the extent of the mortgage or charge on the property or the value of his interest, whichever is less.
(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 280 of a surety or guarantor, the Court shall have jurisdiction to deter- mine 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 as in 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 ap- plies in relation to payments of money.
Effect of floating charge. 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 immediately preceding the com- mencement of the winding up, shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except to the amount of any cash, paid to the company at the time of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of five per cent. per annum or such other rate as may for the time being be notified by the Central Government in this behalf in the Official Gazette: Provided that in relation to a charge created more than three months before the commencement of this Act, this section shall have effect with the substitution, for references to twelve months, of references to three months.
Disclaimer of onerous property in case of a company which is beingwound up. 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 readily saleable, by reason of its binding the possessor thereof either to the performance 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 and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property: Provided that, where any such property has not come to the 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 thereof or such extended period as may be allowed by the Court, 281
(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 re- quire 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, does not within the said period or extended period disclaim the contract, the company shall be deemed to have adopted it.
(5) The Court may’ on the application of any person who is, as against the liquidator, entitled to the benefit or subject, to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just; 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 person who either claims any interest in any disclaimed property or is under any liabi- lity 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 the property to, any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just; and on any such vesting order being made, ‘the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose:’ Provided that, where the property disclaimed is of a lease-hold nature, the Court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or 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 Court thinks 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 comprised only the property comprised in the vesting order; and any 282 mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in and security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Court shall, have power to vest the estate and interest of the company in the property in any person liable, either personally or in a represen- tative character, and either alone or jointly with the company, to perform the lessee’s covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.
(7) Any person injured by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the compensation or damages payable in respect of the injury, and may accordingly prove the amount as a debt in the winding up.
Avoidance of transfers, etc., after commencement of winding 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.
Avoidance of certain attachments, executions, etc., in winding up byor subject to supervision of Court. 537. Avoidance of certain attachments, executions, etc., in
winding up by or subject to supervision of Court.-(1) Where any com- pany 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 the properties or effects of the company after such commencement; shall be void.
(2) Nothing in this section applies to proceedings by the Government. Offences antecedent to or in course of winding up
Offences by officers of companies liquidation.
538. Offences by officers A 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,- (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 fox 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; 283 (b) does not deliver up to the liquidator, or as he directs, all such part of the movable and immovable property 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 up to the liquidator, or as he directs, all such books And papers of the company as are in his custody or under his control and which he is required by law to deliver- up; (d) within the twelve months next before the commencement of the winding up or at any time thereafter, conceals any part of the property 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 the commencement of the winding up or at any time thereafter, 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 been proved 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 to the property or affairs of the company; (i) within the twelve months next before the commencement of the winding up or at any, time thereafter, conceals, destroys, mutilates or falsifies, or is privy to the concealment, destruction, mutilation or falsification of, any book or paper affecting or relating to, the property or affairs of the company; (j)within the twelve months next before the commencement of the winding up or at any time thereafter makes, or is privy to the making of, any false entry in any book or paper affecting or relating to, the property or affairs of the company; (k) within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently parts with, alters or makes any omission in, or is privy to the fraudulent parting with, altering or making of any omission in, any book or paper affecting or relating to the property or affairs of the company; (l) after the commencement of the winding up or at any meeting of the creditors of the company within the twelve months next before the commencement of the winding up, attempts to account for any part of the property of the company by fictitious losses or expenses; (m) within the twelve months next before the commencement of the winding up or at any time thereafter, by any false representation or other fraud, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for; 284 (n) within the twelve months next before the commencement of the winding up or at any time thereafter, under the false pretence that the company is carrying on its business, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for; (o) within the twelve months next before the commencement of the winding up or at any time thereafter, pawns, pledges or disposes of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary course of 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 may extend to 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), (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 true state 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, any false or fraudulent entry in any register, book of account or document belonging to the company; he shall be punishable with imprisonment for a term which may extend to seven years, and shall also be liable to fine. 285
Penalty for frauds by officers. 540. Penalty for frauds by officers.-If any person, being at the time of the commission of the alleged offence an officer of a company which is subsequently 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) with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge on, or has caused or connived at the levying of any execution 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.
Liability where proper accounts not kept.
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 the company was 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 are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid; and (b) where the business of the company has involved dealings in goods, 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 the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.
Liability for fraudulent conduct of business.
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, or the liquidator or any creditor or contributory of the company, may, if it thinks it proper so to do, declare that any persons 286 who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limita- tion of liability, for all or any of the debts or other 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 may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular, the Court may make provision for making the liability of any such person under the declaration a charge on any 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 person claiming 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’ includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.
(3) Where any business of a company is carried on with such
intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for term which may extend to two years, or with fine which may extend to five thousand rupees, or with both.
(4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the 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 appears that any person who has taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager, liquidator or officer of the 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 of trust in relation to the company; the Court may, on the application of the Official Liquidator, of the 287 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 and treasurers, manager, liquidator or officer aforesaid, and compel him to repay ‘or restore the money or property or any part thereof respectively, with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the 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 misapplica- tion, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.
(3) This section shall apply notwithstanding that the matter is one for which the person- concerned may be criminally liable.
Liability under section 542 and 543 to extend to partners or directorsin firm or company. 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.
Prosecution of delinquent officers and members of company. 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 winding up that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, he shall forthwith report the matter to the Registrar and shall furnish to him, such information and give to him such access to and facilities for inspecting and taking copies of any books and papers, being information or books and papers in the possession or under the 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 Regis- trar, he may, if he thinks fit, refer the matter to the Central Gov- ernment for further inquiry. The Central Government shall thereupon investigate the matter and may, if it thinks it expedient, apply to the Court for an order conferring on any person designated by the Central Government for the purpose, with respect to the company concerned, all such powers of investigating the affairs of the company as are provided by this Act in the case of a winding up by the Court. 288
(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 liquida- tor may himself take proceedings against the offender.
(5) If it appears to the Court in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty as aforesaid, and that no report with respect to the matter has been made by the liquidator to the Registrar under
sub-section (2), the Court may, on the application of any person interested in the winding up or of its own motion, direct the liquida- tor to make such a report, and on a report being made accordingly, the provisions of this section shall have effect as though the report had
been made in pursuance of the provisions of sub-section (2).
(6) If, where any matter is reported or referred to the Registrar under this section, he considers that the case is one in which a prosecution ought to be instituted, he shall report the matter to the Central Government; and that Government may, after taking such legal advice as it thinks fit, direct the Registrar to institute pro- ceedings: Provided that no report shall be made by the Registrar under this sub-section without first giving the accused person an opportunity of making a statement in writing to the Registrar and of being heard thereon.
(7) When any proceedings are instituted under this section, it shall 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 assistance in the
manner required by sub-section (7), the Court may, on Die application of the Registrar, direct that person to comply with the requirements of that sub-section.
(9) Where any such application is made with respect to a liquidator, the Court may, unless it appears that the failure or neglect was due to the liquidator not having in his hands sufficient 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
Liquidator to exercise certain powers subject to sanction. 546. Liquidator to exercise certain powers subject to sanction.-
(1) The liquidator may- (a) with the sanction of the Court, when the company is being wound up by or subject to the supervision of the Court; and 289 (b) with the sanction of a special resolution of the 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 persons claiming to be creditors, or having or alleging themselves to 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) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and any claim, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or alleged to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the assets or liabilities or the winding up of the company, on such terms as may be agreed, and take any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.
(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.
Notification that a company is in liquidation.
547. Notification that a company is in liquidation.-(1) Where 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 com- pany, and every- one of the following persons who wilfully authorises or permits the default, namely, any officer of the company, any liqui- dator of the company and any receiver or manager, shall be punishable with fine which may extend to five hundred rupees.
Books and papers of company to be evidence. 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.
Inspection of books and papers by creditors and contributories. 549. Inspection of books and papers by creditors and contribu-
tories.-(1) At any time after the making of an order for the winding up of a company by or subject to the supervision of the Court, any creditor or contributory of the company may, if the Central Govern- ment, 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. 290
(2) Nothing in subsection (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 by or subject to the super- vision 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 dissolution of the company) as the Central Government thinks proper, the destruction of the books and papers of a 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 Court from any direction which may be given by the Central Government in the matter.
(4) If any person acts in contravention of any such rules or of any direction of the Central Government thereunder, 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.
Information as to pending liquidations.
551. Information as to pending liquidations-(1) If the winding up of a company is not concluded within one year after its commencement, the liquidator shall, within one month of the expiry of such year and thereafter until the winding up is concluded, at intervals of not more than one year or at such shorter intervals, if any, as may be prescribed, file a statement in the prescribed form and containing the prescribed particulars, with respect to the proceedings in, and position of, the liquidation- (a) in the case of a winding up by or subject to the supervision of the Court, in Court; and (b) in the case of a voluntary winding up, with the Registrar 291
(2) When the statement is filed in Court under clause (a) of
subsection (1), a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company.
(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 inspect the statement, and to receive a copy thereof or an extract 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 (Act 45 of 1860), and shall, on the application of the liquidator, 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.
Official Liquidator to make payments into the public account of India. 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.
Voluntary liquidator to make payments into Scheduled Bank. 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”: ——————- Company Private Limited”: ————————– Company”: Provided that if the Court is satisfied that for the purpose of carrying on the business of the company or of obtaining advances or for any other reason, it is to the advantage of the creditors or contributories that the liquidator should have an account with any other bank, the Court may authorise the liquidator to make his payments into or out of such other bank- as the Court may select; and thereupon those payments shall be made in the described 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 in excess, at the rate of twelve per cent. per annum and also pay such penalty as may be determined by the Registrar; (b) be liable to pay any expenses occasioned by reason of his default; and (c) also be liable to have all or such part of his remuneration as the Court may think just disallowed, and to be removed from his office by the Court. 292
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.
Unclaimed dividends and undistributed assets to be paid into theCompanies Liquidation Account. 555. Unclaimed dividends and undistributed assets to be paid into
the Companies Liquidation Account.-(1) Where any company is being wound up, if the liquidator has in his hands or under his control any money representing unclaimed dividends payable to any creditor or undistributed assets refundable to any contributory, which have remained unclaimed or undistributed for six months after the date on which they became payable or refundable, the liquidator shall forthwith pay the said money into the public account of India in the Reserve Bank of India.
(2) The liquidator shall, on the dissolution of the company, similarly pay into the said account any money representing unclaimed dividends or undistributed assets in his hands at the date of dis- solution.
(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 the prescribed form, setting forth, in respect of all sums included in such payment, the nature of the sums, the names and last known addresses of the per- sons entitled to participate therein, the amount to which each is en- titled and the nature of his claim thereto, and such other particulars as may be 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 the supervision 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 days of the date of filing the said statement, pay that sum into the Companies Liquidation Account.
(7) (a) Any person claiming to be entitled to any money paid into the Companies Liquidation Account (whether paid in pursuance of this section or under the provisions of any previous companies law) may apply to the Court for an order for payment thereof, and the Court if satisfied that the person claiming is entitled, may make an 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 one month from the, date of the service of the notice why the order should not be made. 293 (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 payment to that person of the sum due to him, after taking such security from him as 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 trans-
ferred 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 interest on the amount retained at the rate of twelve per cent per annum and also pay such penalty as may be determined by the Registrar; (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 the Court, also be liable to have all or such part of his remuneration as the Court may think just to be disallowed, and to be reMoved from his office by the Court.
Enforcement of duty of liquidator to make returns etc.
556. Enforcement of duty of liquidator to make returns etc.-(1) If any 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 the application 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
Meetings to ascertain wishes of creditors or contributories. 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 the company, as proved to it by any sufficient evidence; 294 (b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the Court 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 the value 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.
Court or person before whom affidavit may be sworn.
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 or person lawfully 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. Explanation.-In this sub-section, “India” includes the State of Jammu and Kashmir.
(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 or Vice-Consul, attached, appended or subscribed to any such affidavit or to any other document to be used for the purposes of this Part. Provisions as to dissolution
Power of Court to declare dissolution of company void.
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 dissolution to have been void; and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.
(2) It shall be the duty of the person on whose application the order was made, within twenty-one 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.
Power of Registrar to strike defunct company off register. 560. Power of Registrar to strike defunct company off register.-
(1) Where the Registrar has reasonable cause to believe that a com- pany 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. 295
(2) If the Registrar does not within out 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 letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received to the second letter within one month from the date thereof, a notice will be published in the Official Gazette with a view to striking the name of the company off the register.
(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 register 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 tile 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 Court to wind up a company the name of which has been struck off the register.
(6) If a company, or any member or creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company 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 other persons 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 subsection (6) being delivered to the Registrar for registration, the company shall be 296 deemed to have continued in existence as if its name had not been struck off.
(8)A letter or notice to be sent under this section to a company may be addressed to the company at its registered office, or if no office has been registered, to the care of some director, the managing agent, secretaries and treasurers, manager or other officer of the company, or if there is no director, managing agent, secretaries and treasurers, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned 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 APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUSCOMPANIES LAWS. PART VIII. APPLICATION OF ACT TO COMPANIES FORMED OR REGISTERED UNDER PREVIOUS COMPANIES LAWS
Application of Act to companies formed and registered under previouscompanies laws. 561. Application of Act to companies formed and 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 shall apply in the same manner as if the company had been formed and registered under this Act as a company limited by guarantee; and (c) in the case of a company other than a limited company, this Act shall apply in the same manner as if the company had been formed and registered under this Act as an unlimited company: Provided that- (i) nothing in Table A in Schedule I shall apply 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 (6 of 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.
Application of Act to companies registered but not formed underprevious companies laws. 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: Provided that 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.
Application of Act to unlimited companies registered under previouscompanies laws. 563. Application of Act to unlimited companies registered under previous companies laws.-This Act shall apply to every unlimited company registered as a limited company in pursuance of 297 any previous companies law, in the same manner as it applies to an unlimited company registered in pursuance of this Act as a limited company: Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered as a limited company under the previous companies law concerned.
Mode of transferring shares in the case of companies registered underActs 19 of 1857 and 7 of 1860. 564. Mode of transferring shares in the case of companies regis- tered 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 COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT. PART IX. COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT
Companies capable of being registered.
565. Companies capable of being registered.-(1) With the ex- ceptions 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 Act No. 7 of 1860 or either of them or under any laws or law in force in a Part B State, corresponding to those Acts or either of 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 by guarantee; and the registration shall not be invalid by reason only that it has taken place with a view to the company’s being wound up: Provided that (i) a company registered under the Indian Companies Act, 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 a Part B State), or any Act of Parliament of the United Kingdom or Letters Patent In force in India, shall not register in pursuance of this section as an unlimited company or as a company limited by, guarantee; 298 (iv) a company that is not a joint-stock company as defined in section 566 shall not register in pursuance of this section as a company limited by shares; (v)a company shall not register in pursuance of this section without the assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy, at general meeting 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 limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring that each member undertakes to contribute to the assets of the company, In the event of its being wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, and of the costs, charges and 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, or in the State of Jammu and Kashmir.
Definition of “joint-stock company”.
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 shares or that stock, and no other persons.
(2) Such a company, when registered with limited liability under this Act, shall be deemed to be a company limited by shares.
Requirements for registration of joint-stock companies. 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 documents: – (a) a list showing the names, addresses and occupations of all persons who on a day named in the list, not being more than. 299 six clear days before the day of registration,, were 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, Act of Parliament of the United Kingdom, Royal Charter, Letters Patent, deed of settlement, deed of partnership or other instrument constituting or regulating the company; and (c) if the company is intended to be registered as a limited company, a statement specifying the following particulars:- (i) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists; (ii) the number of shares taken and the amount paid on each share; (iii) the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof;. and (iv) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.
Requirements for registration of companies not being joint-stockcompanies. 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, the secretaries 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 of partnership or other instrument constituting or regulating the company; and (c) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.
Authentication of statements of existing companies. 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.
Power of Registrar to require evedence as to nature of company. 570. Power of Registrar to require evidence as to nature ‘of company.-The Registrar may require such evidence as he thinks necessary for the purpose of satisfying himself whether any company proposing to be registered is or is not a joint-stock company as defined in section 566. 300
Notice to customers on registration of banking company with limitedliability. 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 for the time being interested in the account in respect of which the notice ought to have been given, and so far as respects the account down to the time at which notice is given, but not further or otherwise, the certificate of registration with limited liability shall have no operation.
Change of name for purposes of registration. 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.
Addition of “Limited” of “Private Limited” to name. 573. Addition of “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 that this section shall not be deemed to exclude the operation of section 25.
Certificate of registration of existing companies. 574. Certificate of registration of existing companies.-On com- pliance with the requirements of this Part with respect to registra- tion, and on payment of such fees, if any, as are payable under Schedule X, the Registrar shall certify under his hand that the com- pany 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.
Vesting of property on registration. 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, on ‘such registration, pass to and vest in the’ company as incorporated under this Act for all the estate and interest of the company therein.
Saving for existing liabilities. 576. Saving for existing liabilities.-The registration of a com- pany 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. 301
Continuation of pending legal proceedings. 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 a company limited by guarantee, the resolution declaring the amount of the guarantee, shall be deemed to-be conditions and regulations of the company, in the same manner and with the same incidents as if so much thereof as would, if the company had been formed under this Act, have been required to be inserted in the memorandum, were contained in a registered memorandum, and the residue thereof were contained in registered articles.
(3) All the provisions of this Act shall apply to the company and the members, contributories and creditors thereof, in the same manner in all respects as if it had been formed under this Act, 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 shares shall not apply to any joint-stock company whose shares are not numbered; (c) subject to the provisions of this section, the company shall not have power to alter any provision contained in any Act of Parliament or other Indian law relating to the company; (d) subject to the provisions of this section, the company shall not have power, without the sanction of the Central Government, to alter any provision contained in any Act of Parliament of the United Kingdom, Royal Charter or Letters 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; 302 (f) in the event of the company being wound up, 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 before registration, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members among themselves in respect of any such debt or liability, or to pay or contribute to the payment of the costs, charges and expenses of winding up the company, so far as relates to such debts or liabilities as aforesaid; (g) in the event of the company being wound up, every contributory shall be liable to contribute to the assets of the company, in the course of the winding up, all sums due from him in respect of any such liability as aforesaid; and 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.
(4) The provisions of this Act with respect 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 capital and to provide that a portion of its share capital shall not be capable of being called up except in the event of winding up; (c) the power of a, limited company to determine that a portion of its share capital shall not be capable of being 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 instrument constituting 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) shall derogate from any power of altering its constitution or regulations which may be vested in the company, by virtue of any Act of Parliament or other 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. 303
Power to substitute memorandum and articles for deed of settlement. 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 to 19 with respect to an alteration of the objects of a company shall, so far as applicable, apply to any alteration under this section, with the following 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 the Registrar, the substituted memorandum and articles shall apply to the company in the same manner as if it were a company registered under this Act with that memorandum and those articles, and the company’s deed of settlement shall 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) In this section, the expression “deed of settlement” includes any deed of partnership, Act of Parliament of the United Kingdom, Royal Charter or Letters Patent, or other instrument constituting or regulating the company, not being an Act of Parliament or other Indian law.
Power of Court to stay or restrain proceedings. 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.
Suits stayed on winding up order. 581. Suits stayed on winding up order.-Where an order has been made for winding up, or a provisional liquidator has been appointed for, a company registered in pursuance of this Part, no suit or other legal proceeding shall be proceeded with or commenced against the company or any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose. PART WINDING UP OF UNREGISTERED COMPANIES. PART X.-WINDING ‘UP OF UNREGISTERED COMPANIES
Meaning of “unregistered company”. 582. Meaning of “unregistered company”.-For the purposes of 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 of Parliament of the United Kingdom; 304 (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 or Pakistan immediately before the separation of that country from India or in the State of Jammu and Kashmir immediately before the 26th January, 1950; and (b) save as aforesaid, shall include any partnership, as- sociation or company consisting of more than seven members.
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 the matter 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 it has a principal place of business; and the principal place of business 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 Net voluntarily or subject to the supervision of the Court.
(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 purpose of windIng up its affairs; (b) if the company is unable to pay its debts; (c)if the Court is of opinion that 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 credit-or, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by leaving at Its principal place of business, or by delivering to the 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 may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction ‘of the creditor; 305 (b) if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character of member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company or by otherwise serving the same in such manner as the Court may approve or direct, the company has not, within ten days after service of the notice,- (i)paid, secured or compounded for the debt or demand; or (ii) procured the suit or other legal proceeding to be 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 by him by reason of the same; (c) if execution or other process issued on a decree or order of any Court in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, Is returned unsatisfied in whole or in part; (d) if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.
Power to wind up foreign companies, although dissolved. 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.
Contributories in winding up of unregistered company.
585. Contributories in winding up of unregistered company.-(1) In the event of an unregistered company being wound up, every person shall be deemed to be a contributory, who is liable to pay, 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) the costs, charges and expenses of winding up the com- pany.
(2) Every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any liability to pay or contribute-as aforesaid. 306
(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.
Power to stay or restrain proceedings. 586. Power to stay or restrain proceedings.-The provisions of this Act with respect to staying and restraining suits and legal pro- ceedings 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.
Suits etc. stayed on winding up order. 587. Suits etc. stayed on 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 of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose.
Directions as to property in certain cases.
588. Directions as to property in certain cases.-(1) If an un- registered 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 winding up order or by any subsequent order, direct that all of any part of the property, movable or immovable (including actionable claims), belonging to the company or held by trustees on its behalf, shall vest in the Official Liquidator by his official name; and thereupon the property or the part thereof specified in the order 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 or legal 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.
Provisions of Part cumulative.
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 Ad 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: Provided that an unregistered company shall not, except in the 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.
Saving and construction of enactments conferring power to wind uppartnership, association or company in certain cases. 590. Saving and construction of enactments conferring power to wind up partnership, association or company in certain cases.Nothing in this Part shall affect the operation of any enactment which provides for any partnership, association or company being wound up, or being wound up as a company or as an unregistered company under the Indian Companies Act, 1913 (7 of 1913) or’ any Act repealed by that Act: Provided that references in any such enactment to any provision contained in the Indian Companies Act, 1913 (7 of 1913) or 307 in any Act repealed by that Act shall be read as references to the corresponding provision, if any contained in this Act. PART COMPANIES INCORPORATED OUTSIDE INDIA. PART XI.-COMPANIES INCORPORATED OUTSIDE INDIA Provisions as to establishment of places of business in India
Application of sections 592 to 602 to foreign companies. 591. Application of sections 592 to 602 to foreign companies.- Sections 592 to 602, both inclusive, shall apply to all foreign com- panies, that is to say, companies falling under the following two lasses, namely:- (a) companies incorporated outside India which, after the commencement of this Act, establish a place of business within India; and (b) companies incorporated outside India which have, before the commencement of this Act, established a place of business within India and continue to have an established place of business within India at the commencement of this Act.
Documents, etc. to be delivered to Registrar by foreign companiescarrying on business in India. 592. Documents, etc. to be delivered to Registrar by foreign com-
panies carrying on business in India.-(1) Foreign companies which, after the commencement of this Act, establish a place of business within India shall, within one month of the establishment of the place of business, deliver to the Registrar for registration- (a) a certified copy of the charter, statutes, or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company; and, if the instrument is not in the English language, a certified translation thereof; (b) the full address of the registered or principal office of the company; (c) a list of the directors and secretary of the company,
containing the particulars mentioned in sub-section (2); (d) the name and address or the names and addresses of some one or more persons resident in India, authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company; and (e) the full address of the office of the company in India which is to be deemed its principal place of business in India.
(2) The list referred to in clause (c) of sub-section (1) shall contain the following particulars, that is to say:- (a) with respect to each director,- (i) in the case of. an individual, his present name and surname in full, any former name or names and surname or surnames in full, his usual residential address, his nationality, and if that nationality is not the nationality of origin, his nationality of origin, and his business occupation, if any, or if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships; and 308 (ii) in the case of a body corporate, its corporate name and registered or principal office; and the full name, address, nationality, and nationality of origin, if different from that nationality, of each of its directors-, (b) with respect to the secretary, or where there are joint secretaries, with respect to each of them- (i) in the case of an individual, his present name and surname, any former name or names and surname or surnames, and his usual residential address; and (ii) in the case of a body corporate, its corporate name and registered or principal office: Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated instead of the particulars mentioned in clause (b) of this sub-section.
(3) Clauses (2) and (3) of the Explanation to sub-section (1) of section 303 shall apply for the purpose of the construction of
references in sub-section (2) to present and former names and surnames as they apply for the purposes of the construction of such references
in sub-section (1) of section 303.
(4) Foreign companies, other than those mentioned in sub-section
(1), shall, if they have not delivered to the Registrar before the commencement of this Act the documents and particulars specified in
sub-section (1) of section 277 of the Indian Companies Act, 1913 (7 of 1913), continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.
Return to be delivered to Registrar by foreign company wheredocuments, etc., altered. 593. Return to be delivered to Registrar by foreign company where documents, etc., altered.-If any alteration is made or occurs In- (a) the charter, statutes, or memorandum and articles of a foreign company or other instrument constituting or defining the constitution of a foreign company; or (b) the registered or principal office of a foreign company,or (c) the directors or secretary of a foreign company or the particulars contained in the list of the directors and secretary: or (d) the name or address of any of the persons authorised to accept service on behalf of a foreign company: or (e) the principal place of business of the company in India the company shall, within the prescribed time, deliver to the Registrar for registration a return containing the prescribed particulars of the alteration.
Accounts of foreign company.
594.Accounts of foreign company.-(1) Every foreign company shall, in every calendar year,- (a) make out a balance-sheet and profit and loss account in such form, containing such Particulars and including or having annexed or attached there to such documents (including, in particular documents relating to every subsidiary of the foreign company) as under the provisions of this Act it would, if it had been a Company within the meaning of this Act, have been 309 required to make out and lay before the company in general meeting; and (b) deliver three copies of those documents to the Registrar: Provided that the Central Government may, by notification in the Official Gazette, direct that, in the case of any foreign company or class of foreign company the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in the notification.
(2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof.
(3) Every foreign company shall send to the Registrar with the
documents required to be delivered to him under sub-section (1) three copies of a list in the prescribed form of all places of business established by the company in India as at the date with reference to
which the balance-sheet referred to in sub-section (1) is made out.
Obligation to state name of foreign company, whether limited, andcountry where incorporated. 595. Obligation to state name of foreign company, whether limited, and country where incorporated-Every foreign company shall- (a) in every prospectus inviting subscriptions in India for its shares or debentures, state the country in which the company incorporated; (b) conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the company and the country in which it is incorporated, in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality in which the office or place is situate; (c) cause the name of the company and of the country in which the company is incorporated, to be stated in legible English characters in all business letters, bill-heads and letter paper, and in all notices, advertisements and other official publications of the company; and (d) if the liability of the members of the company is limited. cause notice of that fact- (i) to be stated in every such prospectus as aforesaid and in all business letters, bill-heads, letter paper, notices. advertisements and other official publications of the com- pany, in legible English characters; and (ii) to be conspicuously exhibited on the outside of every office or place where. it carries on business in India, in legible English characters and also in legible characters of the language or one, of the languages in general use in the locality in which the office or place is situate.
Service on foreign company. 596. Service on foreign company.-Any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served if addressed to any person whose name has been delivered to the Registrar under the foregoing provisions 310 of this Part and left at, or sent by post to, the address which has been so delivered: Provided that- (a) where any such company makes default in delivering to the Registrar the name and address of a person resident in India who is authorised to accept on behalf of the company service of process, notices or other documents; or (b) if at any time all the persons whose names and addresses have been so delivered are dead or have ceased so to reside, or refuse to accept service on behalf of the company, or for any reason, cannot be served; a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in India.
