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The Companies Act, 1956

Title : The Companies Act, 1956

Year : 1956



(1) When the affairs of a company have been completely wound up 1*[or when the 2*[Tribunal] is of the opinion that the liquidator cannot proceed with the winding up of a company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company should be made], the 2*[Tribunal] 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 to the order shall within 3 [thirty] 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 4* [five hundred rupees] for every day during which the default continues.

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1. Inserted by Act 65 of 1960, Section 177 (w.e.f. 28-12-1960).

2. Substituted by Act 11 of 2003, Section 81, for "Court".

3. Substituted by Act 31 of 1965, Section 62 and Schedule, for "Fourteen" (w.e.f. 15-10-1965).

4. Substituted by Act 53 of 2000, Section 191, for "fifty rupees" (w.e.f. 13-12-2000).

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Any order made by a Court for, or in me 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.



Appeals from1*[ any order made or decision given before the commencement of the Companies (Second Amendment) Act, 2002],  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.
 
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1. Substituted by Act 11 of 2003, Section 82, for "any order made, or decision given".

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(1) A company may be wound up 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 (b) of sub-section (1).



(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 to1*[five hundred 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.

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1. Substituted by Act 53 of 2000, Section 192, for "fifty rupees" (w.e.f. 13-12-2000).

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A voluntary winding up shall be deemed to commence at the time when the resolution for voluntary winding up is passed.



Consequences of voluntary winding up in the case of a voluntary winding up, the company shall from the commencement of the winding up, cease to carry on 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 to till it is dissolved.
 


(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

1*[(b) it is accompanied by a copy of the report of the auditors of the company (prepared, as far as circumstances admit, in accordance with the provisions of this Act) on the profit and loss account of the company for the period commencing from the date up to which the last such account was prepared and ending with the latest practicable date immediately before the making of the declaration and the balance sheet of the company made out as on the last-mentioned date and also embodies a statement of the company's assets and liabilities as at that date.]

(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 2*[fifty 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 declaration, 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 "a creditors' voluntary winding up".

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1. Substituted by Act 65 of 1960, Section 178, for clause (b) (w.e.f. 28-12-1960).

2. Substituted by Act 53 of 2000, Section 193, for "five thousand rupees" (w.e.f. 13-12-2000).

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The provision contained in section 490 to 498, both inclusive shall subject to the provision of section 498, apply in relation to a members' voluntary winding up.



(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

(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 circumstances whatever, whether with or without the sanction of the1*[Tribunal].

(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.
 
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1. Substituted by Act 11 of 2003, Section 83, for "Court".

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On the appointment of a liquidator, all the powers of the Board of directors and of the managing or whole-time directors,1[***] and manager, if there be any of these, shall cease except for the purpose of giving notice of such appointment to the registrar in pursuance of section 493 or insofar as the company in general meeting or the liquidator may sanction the continuance thereof.

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1. The words "managing agent, secretaries and treasurers," omitted by The Companies (Amendment) Act, 2000, Section 194 (w.e.f. 13-12-2000).

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(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 the1[Tribunal] may, on application by any contributory or by the continuing liquidator or liquidators, determine.

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1. Substituted by Act 11 of 2003, Section 83, for "Court".

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(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 sub-section (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 to1*[one thousand rupees] for every day during which the default continues.

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1. Substituted by Act 53 of 2000, Section 195, for "one hundred rupees" (w.e.f. 13-12-2000).

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(1) Where-

(a) A company (in this section called "the transferor company") 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 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 1* [The Tribunal], the special resolution shall not be valid unless it is 2*[sanctioned by the Tribunal].

(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.

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1. Substituted by Act 11 of 2003, Section 84, for "or subject to the supervision of the court,".

2. Substituted by Act 11 of 2003, Section 84, for "sanctioned by the court".

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(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 such-section (1), he shall be punishable with fine which may extend to1*[five thousand rupees].

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1. Substituted by Act 53 of 2000, Section 196, for "five hundred rupees" (w.e.f. 13-12-2000).

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(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 the 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 to1*[one thousand rupees],

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1. Substituted by Act 53 of 2000, Section 196, for "one hundred rupees" (w.e.f. 13-12-2000).

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(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 1*[Registrar and the 2*[Official Liquidator referred to in clause (c) of sub-section (1) of section 448] a copy each of the account and shall make a return to each of them] 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 3*[five hundred 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.

4*[(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.

(6) The 2 [Official Liquidator referred to in clause (c) of sub-section (1) of section 448], on receiving the account and either the return mentioned in sub-section (3) or the return mentioned in sub-section (4), shall, as soon as may be, make, and the liquidator and all officers, past or present, of the company shall give the 2*[Official Liquidator referred to in clause (c) of sub-section (1) of section 448] all reasonable facilities to make, a scrutiny of the books and papers of the company and if on such scrutiny the 2* [Official Liquidator referred to in clause (c) of sub-section (1) of section 448] makes a report to the 5*[Tribunal] that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest, then, from the date of the submission of the report to the 5*[Tribunal] the company shall be deemed to be dissolved.

(6A) If on such scrutiny the 2*[Official Liquidator referred to in clause (c) of sub-section (1) of section 448] makes a report to the 5*[Tribunal] that the affairs of the company have been conducted in a manner prejudicial as aforesaid, the 5 [Tribunal] shall by order direct the 2*[Official Liquidator referred to in clause (c) of sub-section (1) of section 448] to make a further investigation of the affairs of the company and for that purpose shall invest him with all such powers as the 5*[Tribunal] may deem fit.

(6B) On the receipt of the report of the 2*[Official Liquidator referred to in clause (c) of sub-section (1) of section 448], on such further investigation the 5*[Tribunal] may either make an order that the company shall stand dissolved with effect from the date to be specified by the 5*[Tribunal] therein or make such other order as the circumstances of the case brought out in the report permit.]

(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 6*[five thousand rupees].

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1. Substituted by Act 31 of 1965, Section 54, for certain words (w.e.f. 15-10-1965).

2. Substituted by Act 11 of 2003, Section 85, for "Official Liquidator".

3. Substituted by Act 53 of 2000, Section 198, for "fifty rupees" (w.e.f. 13-12-2000).

4. Substituted by Act 31 of 1965, Section 54, for sub-section (5) and (6) (w.e.f. 15-10-1965).

5. Substituted by Act 11 of 2003, Section 85, for "Court".

6. Substituted by Act 53 of 2000, Section 198, for "five hundred rupees" (w.e.f. 13-12-2000).

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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.



The provisions contained in sections 500 to 509, both inclusive, shall apply in relation to a creditors' voluntary winding up.



(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 me resolution is passed at an adjourned meeting, any resolution passed at 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 to1[ten 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.

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1. Substituted by Act 53 of 2000, Section 199, for "one thousand rupees" (w.e.f. 13-12-2000).

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Last updated on September, 2016

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