Page 344 - DMGT407Corporate and Business Laws

Unit 14: Winding up and Dissolution of a Company

period specified in the declaration, it shall be presumed, until the contrary is shown, that Notes
the director did not have reasonable grounds for his opinion.
If the above provisions are not complied with, the winding up shall not be a members’
voluntary winding up [Vosica vs. Janda Rubber Works AIR (1950) East Punjab 180] and in
such case provisions (s.490 and 498) relating to members voluntary winding up cannot
apply and if liquidator is appointed in pursuance of s. 490 or 498 such appointment would
be bad in law. In such a case, the provisions relating to creditor’s voluntary winding up
(Ss. 500-509) should be followed and the violation of these provisions will make the
winding up proceedings void ab initio (M. Kakshmiah vs. Registrar of Companies,
Trivandrum-unreported case decided by the Kerala High Court) and if default is made in
calling a meeting of the creditors then the company and the Directors’ as the case may be,
shall be punishable with fine which may extend to ` 10,000 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 [s.500 (6)]. The Court may, if moved by the company or its shareholders,
instead of treating the winding up proceedings as invalid, direct the company to convene
the creditors meeting [Light of Asia Insurance Company, I.L.R. 1940 (2) Cal.325]. The
above rules will be applicable even where a declaration of solvency has been filed but in
accordance with the provisions of s.488(2).
The company, however, may pass a fresh resolution for its winding up after complying
with the requirements of s.488 (Declaration of Solvency).
2. Appointment and remuneration of liquidators (s.490): The company in general meeting
must: (a) appoint one or more liquidators for the purpose of winding up the affairs and
distributing the assets of the company; and (b) fix the remuneration, if any, to be paid to
the liquidator or liquidators.

Any remuneration so fixed cannot be increased in any circumstances whatever, whether
with or without the sanction of the Court. No liquidator shall take charge of his office
unless his remuneration is fixed. Further, if a vacancy occurs by death, resignation or
otherwise in the office of the liquidator appointed by the company, the company in
general meeting may, subject to any arrangement with its creditors, fill the vacancy. For
this purpose a meeting may be convened by any contributory or the continuing liquidator
or by the Court on the application of any of them (s.492).
3. Board’s power to cease: On the appointment of a liquidator, all the powers of the Board of
directors and of the managing director or whole-time directors or manager shall cease
except for purpose of giving a notice of such appointment to the Registrar. But their
powers may continue if sanctioned by the general body or by the liquidator so far as the
sanction applies (s.491).
4. Notice of appointment of liquidator to be given to the Registrar (s.493): The company
must give notice to the Registrar regarding the appointment of liquidator within 10 days
of his appointment. In case of default, the company and every officer of the company
(including liquidator) who is in default, shall be punishable with fine which may extend
to ` 1,000 for every day during which the default continues.
5. Power of liquidator to accept shares, etc., as consideration of sale of property of the
company (s.497): The liquidator may accept shares, policies or like interests in consideration
of the sale of the company’s undertaking to another company, with an object to distribute
them amongst the members of transferor company, provided: (a) a special resolution is
passed by the company to that effect; and (b) he purchases the interest of any dissenting
member at a price to be determined by agreement or by arbitration.

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