Page 348 - DMGT407Corporate and Business Laws

Unit 14: Winding up and Dissolution of a Company

2. The rules relating to winding up order are not being observed, or Notes
3. The liquidator is prejudicial or is negligent in collecting the assets.
The court, in such a case, gets the same powers as it has in the case of compulsory winding up
under order of the court. The court may also appoint an additional liquidator or liquidators. It
may also remove any liquidator and fill any vacancy occasioned by the removal or by death or
by resignation [Section 524]. A liquidator so appointed 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 appointed
in accordance with the provisions of the Act relating to the appointment of liquidator in voluntary
winding up, subject, however, to any restrictions the court may impose (Section 525).
Unless the court imposes restrictions on the exercise of any powers by the liquidator, he will
have all the powers conferred on a liquidator in voluntary winding up [Section 526(1)]. The
court will have as wide powers as in compulsory winding up. The court may stay suits or legal
proceedings. It can make or enforce calls and all other orders necessary for beneficial winding
up of the company [Section 526(2)].

Powers of court to order compulsory winding up [Section 527]: The court may pass an order for
compulsory winding up superseding the order of winding up under its supervision. The court
may then appoint a person who is the liquidator, either provisionally or permanently to be
liquidator in winding up by the court in addition to and subject to the control of official liquidator.
Dissolution of the company: In the case of winding up under the supervision of the court, the
company is deemed to be dissolved from the date the order of the court is issued to that effect.
The court will issue such an order when the affairs of the company have been completely wound
up and the liquidator has made an application to the court requesting it to order for the dissolution
of the company.

Where a company has been dissolved according to the due process of law, (except under Section
560—defunct companies) on the expiry of 5 years from the date of dissolution of the company,
the name of the company should be struck off the Register after noting against its name that it
has been dissolved.

Task A company was incorporated for the purpose of manufacturing machinery tools,
implements etc. It spents a substantial part of its subscribed capital on fixed assets. It
borrowed a sum of ` 30 Lakhs from a bank for providing working capital. As the company
was unable to pay back this loan, the bank obtained a decree from a court. The stock-in-
trade, plant and machinery and all the fixed assets of the company were sold out in
execution of the decree, leaving no surplus for the company.

Would it be just and equitable to wind up the company in the circumstances?

Self Assessment

Fill in the blanks:
4. The company by ……………….resolution, resolve that it be wound up by the court.
5. The procedure in a creditors’ voluntary winding up is based upon the assumption that the
company is…………………...
6. The ……………………………shall not grant the permission to the registrar unless the
company has been given the opportunity of making its representation against the petition
of the registrar for winding up.

LOVELY PROFESSIONAL UNIVERSITY 341