Page 351 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 9. ………………dues and debts due to secured creditors come first in the order of priority in
paying off debts in a winding up.

14.4 Liquidators

The commencement of winding up of a company does not put an end to the existence of the
company. Its assets are to be realised and distributed among the debenture holders, creditors,
shareholders etc. For the purpose, somebody has to act as an agent of the company. Such agent
is called liquidator. For the purpose of filing Income Tax Return for the income earned during
the winding up it has been held that the liquidator will be regarded as principal officer of the
company (Mysore Spun Silk Mills Ltd.).
Rules relating to their appointment, rights, powers and duties can be discussed under the
following heads: (1) In compulsory winding up. (2) In voluntary winding up.

Liquidators in compulsory winding up: On a winding up order being made in respect of company,
the official liquidator, by virtue of his office becomes the liquidator of the company (s.449). Note
that, the court has no power to appoint private persons as liquidators.
An official liquidator is attached to each High Court and is appointed by the central government.
The Official Receiver attached to District Court for insolvency purposes shall be the official
liquidator attached to the District Court (s. 448).
Provisional liquidator: After presentation of the petition but before the hearing, application
may be made to the court by the company or creditors or contributories to appoint a provisional
liquidator to safeguard the assets pending the hearing. The powers of a provisional liquidator
are the same as those of a liquidator unless limited by the court. As soon as winding up order is
made, the provisional liquidator becomes the liquidator of the company (s.450).
Committee of inspection to act with Liquidator (already explained): Liquidators in voluntary
winding up:

1. In member’s voluntary winding up the following points have already been explained: (a)
Appointment and remuneration; (b) Notice of his appointment to Registrar; (c) Duty to
call creditors’ meeting in case of insolvency; (d) Duty to call general meeting every year;
(e) Duty to call final meeting.
2. In Creditors’ Voluntary Winding up the following points have already been explained: (a)
Appointment; (b) Remuneration; (c) Duty to call meeting of the creditors at the end of each
year; (d) Duty to call final meeting.

Common Points as Regards Liquidators in Voluntary Winding up

Restriction on appointment. A Body Corporate cannot be appointed as a voluntary liquidator
and any such appointment would be void. If a body corporate acts as a liquidator, that body
corporate, its director or manager shall be punishable with fine up to ` 10,000 (s.513).
Further, any person who gives or agrees to give or offers to any member or creditor of a
company any gratification whatever with a view to: (a) securing his own appointment or
nomination as the company’s liquidator, (b) securing or preventing the appointment or
nomination of some person other than himself, as a liquidator of the company, shall be punishable
with fine up to ` 1,000 (s.514).
Power of court to appoint and remove a liquidator (s.515): (1) If for any cause whatever, there is
no liquidator acting, the court may appoint an official liquidator or any other person as a
liquidator; (2) The court may, on cause shown, remove a liquidator and appoint an official
liquidator or any other person as a liquidator in place of the removed liquidator; (3) The court
may also appoint or remove a liquidator on the application made by the Registrar in this behalf;

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