Page 340 - DMGT407Corporate and Business Laws

Unit 14: Winding up and Dissolution of a Company

The object of such a statement is to give the liquidator an idea as to the financial affairs and Notes
liabilities of the company. The creditors and contributories of the company can inspect the
statement. The statement should be made within 21 days (or such extended time not exceeding
3 months as the official liquidator or Tribunal may for special reasons allow) after the relevant
date. The relevant date is the date of the winding up order by the court or where a provisional
liquidator is appointed, the date of his appointment. The statement must be submitted and
verified by affidavit by one or more of the persons who, at the relevant date are the directors and
by the person who at that time is the manager, secretary or other chief officer of the company.
Defaulter shall be punishable with imprisonment up to 2 years or with fine up to ` 1,000 for
every day during which default continues or with both.
Committee of inspection: The court may, at the time of making an order of winding of a company
or at any time thereafter, direct that there shall be appointed a committee of inspection to act
with the liquidator. In such a case the liquidator must, within 2 months from the date of such
direction convene a meeting of the creditors of the company for the purpose of determining
who are to be members of the committee. Within 14 days from the date of the creditors meeting
(or such further time as the Court in its direction may grant for the purpose), the liquidator
should convene a meeting of the contributories to consider the decision of the creditors’ meeting
with respect to the membership of the committee. It is open to the meeting of the contributories
to accept the decision of the creditors’ meeting with or without modifications or to reject it. The
liquidator must apply to the court for directions as to what the composition of the committee
shall be and who shall be members thereof. However, it will not be necessary to seek directions
in this regard where the meeting of the contributories accept the decision of the creditors’
meeting in its entirety.

Section 465 provides: (i) a committee of inspection cannot have more than 12 members; (ii) the
committee shall have the right to inspect the accounts of the liquidator at all reasonable times;
(iii) it must meet at such times as it may from time to time appoint and the liquidator or any
member of the committee may also call a meeting of the committee as and when he thinks
necessary; (iv) the quorum for the meeting of the committee shall be 1/3rd of the total number
or two whichever is higher; (v) a member of the committee may resign by notice in writing. But
where 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 the
members, he shall cease to remain a member.

14.2.4 General Powers of the Court

1. Power of court to stay winding up (s.446): The court may at any time after making a
winding up order (on the application either of the official liquidator of any creditor or
contributor and on proof to the satisfaction of the court that, all proceedings in relation to
the winding up order 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. Settlement of the list of contributories (s.467): The court has the power to cause the assets
of the company to be collected and applied in discharge of its liabilities. For this purpose
the court has the power to make a list of contributories. 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.
3. The power to make calls (s.470): The court is empowered to make call on all or any of the
contributories to the extent of their liability. It should be noted that, no statutory liability
for an unpaid call can be set off against a credit except in the following cases: (a) in the case
of an unlimited company, a contributory may set off his debt against any money due to
him from the company on any independent dealing or contract with the company. But no

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