Detailed Procedure for Winding Up - Under Order of the Court

In our country, every corporate house has incorporated many group companies which were run efficiently for some time. But with passage of time, the utility of having such large number of group companies reduced and then the management thought it fit to discontinue business activity in such companies.


The typical problem with such companies is

A)                           Auditors qualify that the Company is no more a going concern.

B)                           There are assets which are no longer put to use and if disposed off, would fetch value much lower than its WDV.

C)                           There are debtors which will not be realized

D)                           There are some creditors who knock your doors on regular basis.


Under the Companies Act, 1956, it is not very easy to close a Company which does not have any business activity for the past few years. However, it is very much possible.




433 of the Act provides for circumstances in which company may be wound up by Court / Tribunal. According to the Section, a company may be wound up by the Tribunal under the following circumstances:


(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal;

(b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting;

(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two;

(e) if the company is unable to pay its debts;

(f) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up;

(g) if the company has made a default in -filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years;

(h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, freindly relations with foreign States, public order, decency or morality;

(i) if the Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G:


Provided that the Tribunal shall make an order for winding up of a company under clause (h) on application made by the Central Government or a State Government


For understanding the process of winding up under order of the Court / Tribunal, we presume that any of the circumstances given in bold above exist.




1) Section 439: Petition for winding up can be made by any of the persons and in the manner as mentioned in Section 439. In this case, the Company can make the application.


2) Section 439A: Statement of Affair to be filed on winding up of a company. The Company shall file with the Tribunal a statement of its affairs, alongwith the petition for winding up.


3) The petition for winding up shall be made in Form 45, 46 or 47 prescribed under Rule 95 of the Companies (Court) Rules, 1959.


4) A copy of the petition is to be furnished to the creditor within 24 hours of his requiring the same on payment of the prescribed charges.


5) The Petition is be advertised in Form No. 48 of the Companies (Court) Rules, 1959 subject to any directions of the Court not less than 14 days before the date fixed for hearing in one issue of English and Regional Language newspaper circulating in the state concerned. [Rule 99 of Companies (Court) Rules, 1959]


6) Apply to the concerned High Court with an affidavit (notarized) showing sufficient grounds for the appointment of provisional liquidator.


7) Obtain order of the concerned High court appointing the official liquidator as the provisional liquidator (Rule 106)


8) On receipt of the winding up order from the High Curt it should be advertised in Form No. 53 of the Companies (Court) Rules, 1959 within 14 days of the date of making the order in one issue of English and Regional Language newspaper circulating in the state concerned.


9) A copy of the order must be served upon such person as the Judge may direct (Rule 113)


10) File with the ROC, a certified copy of the order in Form No. 21 within 30 days from the date of making the order.


11) A statement of Affairs of the Company in Form No. 57 of the Companies (Court) Rules, 1959 must be submitted to the Official Liquidator within 21 days from the date of appointment of the Official Liquidator or from the date of the winding up order or within such extended time not exceeding three months.


12) The aforesaid statement must be submitted in duplicate, one copy of which shall be verified by an affidavit in Form No. 58 of the Companies (Court) Rules, 1959. [Section 454 of the Companies Act, 1956 and Rule 127 of the Companies (Court) Rules, 1959]


13) The winding up proceedings will be carried out in accordance with the provisions of Section 426 to 483 and 528 to 559 and as per the relevant Rules of the Companies (Court) Rules, 1959.


14) The winding up of a Company by order of the concerned High Court shall be deemed to be concluded at the date on which the order dissolving the company has been reported by the Official Liquidator to the concerned Registrar of Companies [Rule 284(a) of the Companies (Court) Rules, 1959].

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on 02 March 2010
Published in Corporate Law
Views : 22482
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