The Company Liquidator

Section 275(3). Where a provisional liquidator is appointed, the Tribunal may limit and restrict his powers by the order appointing him or by a later order; otherwise he has the same powers as a liquidator.

Section 275(5): fee and terms. The terms and conditions and the fee are specified by the Tribunal on the basis of the task to be performed, the experience and qualification of the liquidator, and the size of the company.

Section 275(6): the conflict declaration. On appointment the liquidator shall, within seven days, file with the Tribunal a declaration in the prescribed form disclosing any conflict of interest or lack of independence, and that obligation continues throughout his term.

Section 275(7). While passing the winding up order the Tribunal may appoint the provisional liquidator as the Company Liquidator for the conduct of the proceedings.

Removal and liability: section 276

Section 276(1): five grounds. On reasonable cause shown and for reasons recorded in writing, the Tribunal may remove the provisional liquidator or Company Liquidator for:

• (a) misconduct;
• (b) fraud or misfeasance;
• (c) professional incompetence or failure to exercise due care and diligence in performing his powers and functions;
• (d) inability to act; or
• (e) conflict of interest or lack of independence during the term of his appointment that would justify removal.

Section 276(2). On death, resignation or removal, the Tribunal may transfer the work to another Company Liquidator, for reasons recorded in writing.

Section 276(3): personal liability. Where the Tribunal is of opinion that a liquidator is responsible for causing loss or damage to the company due to fraud or misfeasance or failure to exercise due care and diligence, it may recover or cause to be recovered such loss or damage from the liquidator and pass such other orders as it thinks fit.

Section 276(4). The Tribunal shall, before passing any order under the section, give a reasonable opportunity of being heard.

The first report: section 281

Section 281(1). The Company Liquidator shall, within sixty days from the order, submit to the Tribunal a report containing:

• (a) the nature and details of the assets, including location and value, stating separately the cash in hand and at bank and the negotiable securities; proviso, the valuation shall be obtained from registered valuers;
• (b) the capital issued, subscribed and paid-up;
• (c) the existing and contingent liabilities, with the names, addresses and occupations of creditors, secured and unsecured debts stated separately, and for secured debts the particulars of the securities, their value and the dates on which they were given;
• (d) the debts due to the company, from whom, and the amount likely to be realised;
• (e) guarantees extended by the company;
• (f) the list of contributories, the dues payable by them and any unpaid call;
• (g) trade marks and intellectual property owned;
• (h) subsisting contracts, joint ventures and collaborations;
• (i) holding and subsidiary companies;
• (j) legal cases filed by or against the company; and
• (k) any other information the Tribunal directs or he considers necessary.

Section 281(2): the fraud opinion. He shall include how the company was promoted or formed, and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer in relation to the company since its formation, and any other matter it is desirable to bring to the Tribunal's notice.

Section 281(3): viability. He shall also report on the viability of the business or the steps necessary for maximising the value of the assets.

That sub-section is the modern one. The liquidator is not only an undertaker; he must say whether the business can be saved or sold whole.

Section 281(4) and (5). He may make further reports; and any person describing himself in writing as a creditor or contributory may, himself or by his agent, inspect the report at all reasonable times and take copies or extracts on payment of the prescribed fees.

What the Tribunal does with it: section 282

Section 282(1). On considering the report the Tribunal shall fix a time limit within which the entire proceedings shall be completed and the company dissolved. Proviso: it may revise that time limit at any stage if, after hearing the Company Liquidator, creditors, contributories or any other interested person, it is of opinion that it will not be advantageous or economical to continue the proceedings.

Section 282(2): sale as a going concern. The Tribunal may order the sale of the company as a going concern, or of its assets or part of them; and it may appoint a sale committee of such creditors, promoters and officers as it decides to assist the Company Liquidator.

Section 282(3): fraud. Where a report is received from the Company Liquidator, the Central Government or any person that a fraud has been committed, the Tribunal shall, without prejudice to the winding up, order an investigation under section 210, and on the investigation report may pass orders and give directions under sections 339 to 342 or direct the Company Liquidator to file a criminal complaint.

Section 282(4) and (5). The Tribunal may order steps to protect, preserve or enhance the value of the assets, and pass such other orders or directions as it considers fit.

Custody and cooperation: sections 283 and 284

Section 283(1). On the winding up order or the appointment of a provisional liquidator, the liquidator shall, on the Tribunal's order, forthwith take into his custody or control all the property, effects and actionable claims to which the company is or appears to be entitled, and take steps to protect and preserve them.

Section 283(2): the deeming. Notwithstanding sub-section (1), all the property and effects of the company shall be deemed to be in the custody of the Tribunal from the date of the winding up order.

That is an important distinction to make in an answer. The liquidator has custody or control in fact; the property is deemed to be in the custody of the Tribunal in law.

Section 283(3). On application or otherwise, the Tribunal may require any contributory on the list, and any trustee, receiver, banker, agent, officer or other employee to pay, deliver, surrender or transfer forthwith or within such time as it directs any money, property, books or papers in his custody or control to which the company is or appears to be entitled.

Section 284: cooperation. Promoters, directors, officers and employees who are or have been in the employment of the company, or acting or associated with it, shall extend full cooperation to the Company Liquidator. If any such person does not assist or cooperate, the liquidator may apply to the Tribunal, which shall by order direct him to comply with the liquidator's instructions and cooperate.

The advisory committee: section 287

Section 287(1). The Tribunal may, while passing the winding up order, direct that there shall be an advisory committee to advise the Company Liquidator and to report to the Tribunal on such matters as it directs.

Section 287(2). The committee shall consist of not more than twelve members, being creditors and contributories of the company or such other persons in such proportion as the Tribunal may direct, keeping in view the circumstances of the company.

Section 287(3). The Company Liquidator shall convene a meeting of creditors and contributories, as ascertained from the books and documents, within thirty days of the winding up order, to enable the Tribunal to determine who may be members of the committee.

Section 287(4), (5) and (6). The committee may inspect the books of account and other documents, assets and properties at a reasonable time; its meetings and procedure are as prescribed; and its meetings are chaired by the Company Liquidator.

Reports and review: section 288

The Company Liquidator shall make periodical reports to the Tribunal and in any case a report at the end of each quarter on the progress of the winding up, in the prescribed form and manner; and the Tribunal may, on his application, review its own orders and make such modifications as it thinks fit.

The powers: section 290(1)

Subject to the Tribunal's directions, the Company Liquidator shall have the power:

• (a) to carry on the business of the company so far as may be necessary for the beneficial winding up;
• (b) to do all acts and execute, in the name and on behalf of the company, all deeds, receipts and other documents, using the company's seal where necessary;
• (c) to sell the immovable and movable property and actionable claims by public auction or private contract, with power to transfer the property to any person or body corporate, or to sell in parcels;
• (d) to sell the whole of the undertaking of the company as a going concern;
• (e) to raise any money required on the security of the assets;
• (f) to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company;
• (g) to invite and settle claims of creditors, employees or any other claimant, and distribute the sale proceeds in accordance with the priorities established under this Act;
• (h) to inspect the records and returns of the company on the files of the Registrar or any other authority;
• (i) to prove, rank and claim in the insolvency of any contributory for any balance against his estate, and to receive dividends in that insolvency as a separate debt rateably with the other separate creditors;
• (j) to draw, accept, make and endorse any negotiable instrument in the name and on behalf of the company, with the same effect as if drawn in the course of its business;
• (k) to take out, in his official name, letters of administration to any deceased contributory and do any other act in his official name necessary to obtain payment from a contributory or his estate, the money due being deemed due to the Company Liquidator himself for that purpose;
• (l) to obtain professional assistance or appoint any professional, and to appoint an agent to do business he cannot do himself;
• (m) to take all such actions and sign, execute and verify any paper, deed, document, application, petition, affidavit, bond or instrument necessary for the winding up, for distribution of assets, and in discharge of his duties; and
• (n) to apply to the Tribunal for such orders or directions as may be necessary.

Section 290(2) and (3). The exercise of those powers is subject to the overall control of the Tribunal, and he shall perform such other duties as the Tribunal may specify.

Two powers deserve emphasis in an answer. Clause (a), carrying on the business, is limited by the words "so far as may be necessary for the beneficial winding up", so it is not a licence to trade generally. And clause (d), selling the undertaking as a going concern, is what preserves employment and value, and it is the power the Tribunal supports with a sale committee under section 282(2).

Professional assistance: section 291

The Company Liquidator may, with the sanction of the Tribunal, appoint one or more chartered accountants, company secretaries, cost accountants, legal practitioners or other professionals on such terms as may be necessary to assist him; and any person so appointed shall forthwith disclose to the Tribunal, in the prescribed form, any conflict of interest or lack of independence.

Control by the creditors: section 292

Section 292(1). In administering and distributing the assets, the Company Liquidator shall have regard to any directions given by resolution of the creditors or contributories at a general meeting or by the advisory committee.

Section 292(2): who prevails. Directions given by the creditors or contributories at a general meeting shall, in case of conflict, be deemed to override directions given by the advisory committee.

Section 292(3): meetings. He may summon meetings of creditors or contributories whenever he thinks fit to ascertain their wishes; and he shall summon them at such times as they may by resolution direct, or whenever requested in writing by not less than one-tenth in value of the creditors or contributories.

Section 292(4): the appeal. Any person aggrieved by any act or decision of the Company Liquidator may apply to the Tribunal, which may confirm, reverse or modify it and make such further order as is just and proper.

Books and accounts: sections 293 and 294

Section 293. He shall keep proper books in the prescribed manner, with entries or minutes of proceedings at meetings and such other matters as may be prescribed; and any creditor or contributory may, subject to the control of the Tribunal, inspect them personally or through an agent.

Section 294(1) and (2). He shall maintain proper and regular books of account including receipts and payments, and shall, at prescribed times but not less than twice in each year of his tenure, present to the Tribunal an account of receipts and payments in the prescribed form in duplicate, verified by a declaration.

Section 294(3) and (4). The Tribunal shall cause the accounts to be audited as it thinks fit, the liquidator furnishing vouchers and information and producing his books on demand; and when audited, one copy is filed with the Tribunal and the other delivered to the Registrar, where it is open to inspection by any creditor, contributory or person interested.

Section 294(5): Government companies. Where the account relates to a Government company, a copy goes to the Central Government, or the State Government, or both, according to which of them is a member.

Section 294(6). He shall cause the audited accounts, or a summary, to be printed and send a printed copy by post to every creditor and every contributory; the Tribunal may dispense with this in any case it thinks fit.

A worked example

Badlapur Alloys Limited is ordered to be wound up on 1 April.

The appointment. At the time of passing the order the Tribunal appoints a Company Liquidator from among the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016, and fixes his terms and fee by reference to the task, his experience and qualification, and the size of the company. Within seven days he files a declaration disclosing any conflict of interest or lack of independence, and that duty continues throughout his term. Had a provisional liquidator been appointed earlier, the Tribunal could have appointed him as the Company Liquidator.

Custody. He forthwith takes into his custody or control all the property, effects and actionable claims of the company and takes steps to preserve them; but in law all the property is deemed to be in the custody of the Tribunal from the date of the order. The company's banker, who holds fixed deposits, and a former officer, who has the minute books, may be directed by the Tribunal to deliver them up forthwith: section 283(3). The promoters, directors, officers and employees must extend full cooperation, and if the former managing director will not, the liquidator applies to the Tribunal, which directs him to comply: section 284.

The report. Within sixty days of the order he submits his report, with the assets and their value from registered valuers, the capital, the creditors secured and unsecured with particulars of securities and their dates, the debts due to the company and what is likely to be realised, the guarantees, the list of contributories and unpaid calls, the trade marks, the subsisting contracts, the holding and subsidiary companies, and the pending cases. He states how the company was promoted and gives his opinion whether any fraud was committed, and reports on the viability of the business and the steps for maximising the value of the assets. A creditor may inspect the report and take copies on payment of the prescribed fees.

The Tribunal's directions. On that report the Tribunal fixes a time limit for completing the proceedings and dissolving the company, and, the business having a viable order book, orders the sale of the company as a going concern, appointing a sale committee of creditors, promoters and officers to assist: section 282(1) and (2).

Fraud. The liquidator's report says the company's stock was stripped by its promoters in the months before the petition. The Tribunal, without prejudice to the winding up, orders an investigation under section 210, and on the report may give directions under sections 339 to 342 or direct the Company Liquidator to file a criminal complaint: section 282(3).

The committees and the meetings. Within thirty days of the order the liquidator convenes a meeting of creditors and contributories so that the Tribunal may decide who sits on an advisory committee of not more than twelve members, which he chairs and which may inspect the books and the assets. Separately, creditors holding more than one-tenth in value ask him in writing to summon a meeting; he must do so: section 292(3).

A conflict of directions. The advisory committee advises him to sell the plant piecemeal; a general meeting of creditors resolves that it be sold whole. The creditors' resolution overrides the committee's advice: section 292(2). And a contributory who thinks the sale price wrong may apply to the Tribunal, which may confirm, reverse or modify the liquidator's decision: section 292(4).

Running the business. To complete a half-finished export order he carries on the business, but only so far as necessary for the beneficial winding up: section 290(1)(a). He borrows on the security of the assets to buy the raw material (clause (e)), draws and endorses cheques in the company's name (clause (j)), defends a suit brought against the company (clause (f)), and, with the Tribunal's sanction, appoints a chartered accountant and a legal practitioner to assist, who must disclose any conflict of interest (section 291).

A dead contributory. One contributory has died and no representative has been brought on record. The liquidator may take out letters of administration in his official name, the money due being deemed due to him for that purpose: section 290(1)(k).

Reporting. He makes periodical reports and in any case a quarterly report on the progress of the winding up, keeps proper books with minutes of meetings open to inspection by any creditor or contributory, and twice a year presents to the Tribunal his account of receipts and payments in duplicate, verified by declaration. The Tribunal has the accounts audited; one audited copy is filed with the Tribunal and the other delivered to the Registrar for public inspection; and the liquidator prints the accounts or a summary and posts a copy to every creditor and contributory, unless the Tribunal dispenses with it.

If he fails. Suppose he sells the plant to a company in which he is interested, having disclosed nothing. That is conflict of interest or lack of independence under section 276(1)(e), and may be misconduct under clause (a). The Tribunal, after giving him a reasonable opportunity of being heard and recording its reasons in writing, may remove him, transfer his work to another Company Liquidator, and recover from him the loss or damage caused to the company: section 276.

Distinctions that carry marks

What this does NOT mean

It does not mean the liquidator is chosen from a Central Government panel. Since the Code, he is appointed from among insolvency professionals registered under it, the old sub-section (4) having been omitted.

It does not mean he may trade freely. He may carry on the business so far as may be necessary for the beneficial winding up, and under the overall control of the Tribunal.

It does not mean the property is his. He has custody or control; the property is deemed to be in the custody of the Tribunal from the date of the order.

It does not mean the advisory committee governs him. Directions of the creditors or contributories in general meeting override the committee's directions.

It does not mean his decisions are final. Any person aggrieved may apply to the Tribunal, which may confirm, reverse or modify them.

It does not mean he escapes the consequences of carelessness. The Tribunal may remove him on five grounds and recover from him the loss caused by fraud, misfeasance or want of due care and diligence.

Quick revision

• 275: the Tribunal appoints the Company Liquidator at the time of the winding up order, from among insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016; a provisional liquidator's powers may be limited, otherwise they are the same as a liquidator's; terms and fee fixed by the Tribunal on the task, experience, qualification and size of the company; a conflict declaration within seven days, continuing throughout; and the provisional liquidator may be made the Company Liquidator.
• 276: removal for misconduct, fraud or misfeasance, professional incompetence or want of due care and diligence, inability to act, or conflict of interest or lack of independence, on reasonable cause and reasons recorded in writing; transfer of work on death, resignation or removal; recovery of loss caused by fraud, misfeasance or want of due care; and a reasonable opportunity of being heard before any order.
• 281: a report within sixty days covering assets valued by registered valuers, capital, secured and unsecured liabilities with particulars of securities, debts due, guarantees, contributories and unpaid calls, intellectual property, subsisting contracts, holding and subsidiary companies, and legal cases; how the company was promoted and whether any fraud was committed; the viability of the business and steps for maximising value; further reports; and inspection and copies by any creditor or contributory on the prescribed fees.
• 282: the Tribunal fixes and may revise the time limit for completing the proceedings and dissolving the company; may order sale as a going concern or of assets, with a sale committee; on a report of fraud shall order investigation under section 210 and may give directions under sections 339 to 342 or direct a criminal complaint; and may order steps to protect, preserve or enhance the value of the assets.
• 283 and 284: the liquidator takes custody or control of all property, effects and actionable claims, though the property is deemed to be in the Tribunal's custody from the date of the order; the Tribunal may require any contributory, trustee, receiver, banker, agent, officer or employee to deliver up property, books or papers; and promoters, directors, officers and employees must extend full cooperation, failing which the Tribunal directs them to comply.
• 287 and 288: an advisory committee of not more than twelve creditors and contributories, the liquidator convening the meeting within thirty days and chairing the committee, which may inspect books, assets and properties; and periodical and quarterly reports to the Tribunal, which may review its own orders on the liquidator's application.
• 290: fourteen powers, chiefly to carry on the business so far as necessary for a beneficial winding up, execute documents and use the seal, sell property and actionable claims by auction or private contract or in parcels, sell the whole undertaking as a going concern, raise money on the security of the assets, sue and defend, invite and settle claims and distribute according to the Act's priorities, inspect the Registrar's records, prove in a contributory's insolvency, draw and endorse negotiable instruments, take out letters of administration to a deceased contributory, appoint professionals and agents, sign and verify all necessary documents, and apply to the Tribunal for directions; all subject to the overall control of the Tribunal.
• 291: with the Tribunal's sanction, chartered accountants, company secretaries, cost accountants, legal practitioners or other professionals may be appointed, and must disclose any conflict of interest forthwith.
• 292: he must have regard to the directions of creditors or contributories in general meeting or of the advisory committee, the general meeting prevailing in a conflict; he may summon meetings at will and must when they resolve or when one-tenth in value requests in writing; and any person aggrieved may apply to the Tribunal.
• 293 and 294: proper books with minutes, open to any creditor or contributory subject to the Tribunal's control; books of account of receipts and payments; accounts twice a year in duplicate, verified by declaration; audit by the Tribunal; one copy filed with the Tribunal, the other with the Registrar for public inspection; copies to the Central or State Government for a Government company; and the audited accounts or a summary printed and posted to every creditor and contributory, unless dispensed with.

Test yourself

1. Who may be appointed Company Liquidator? The Tribunal appoints him at the time of passing the winding up order, from amongst the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016: section 275(1) and (2). A provisional liquidator already appointed may be made the Company Liquidator: section 275(7).

2. On what grounds may a liquidator be removed, and what else may the Tribunal do? Misconduct; fraud or misfeasance; professional incompetence or failure to exercise due care and diligence; inability to act; or conflict of interest or lack of independence during his term: section 276(1). The Tribunal may also recover from him any loss or damage caused to the company by fraud, misfeasance or want of due care and diligence: section 276(3); and must first give him a reasonable opportunity of being heard.

3. What must the liquidator's first report contain, and by when? Within sixty days from the order: the assets and their value obtained from registered valuers, the capital issued, subscribed and paid-up, the existing and contingent liabilities with creditors' particulars and details of securities, debts due to the company, guarantees, the list of contributories and unpaid calls, trade marks and intellectual property, subsisting contracts and joint ventures, holding and subsidiary companies, legal cases, and anything else directed or thought necessary; together with how the company was promoted, whether any fraud was committed, and a report on the viability of the business and steps for maximising the value of the assets: section 281.

4. Name six powers of the Company Liquidator. Any six of: to carry on the business so far as necessary for the beneficial winding up; to execute deeds and documents in the company's name; to sell property and actionable claims by public auction or private contract or in parcels; to sell the undertaking as a going concern; to raise money on the security of the assets; to sue and defend; to invite and settle claims and distribute according to the Act's priorities; to inspect the Registrar's records; to prove in a contributory's insolvency; to draw and endorse negotiable instruments; to take out letters of administration to a deceased contributory; to appoint professionals and agents; to sign and verify necessary documents; and to apply to the Tribunal for directions: section 290(1).

5. Whose directions must the liquidator follow? Those of the Tribunal, whose overall control governs the exercise of his powers; and, in administering and distributing the assets, he must have regard to directions given by resolution of the creditors or contributories at a general meeting or by the advisory committee, the general meeting's directions overriding the committee's in case of conflict: sections 290(2) and 292(1) and (2).

6. How often are his accounts presented and audited? He must present an account of receipts and payments to the Tribunal at prescribed times and not less than twice in each year of his tenure, in duplicate and verified by a declaration; the Tribunal causes them to be audited; one copy is then filed with the Tribunal and the other delivered to the Registrar, open to inspection by any creditor, contributory or person interested; and the audited accounts or a summary must be printed and posted to every creditor and contributory unless the Tribunal dispenses with it: section 294.