Grounds for Tribunal Winding Up

In one line

Five grounds, five classes of petitioner and one set of conditions: the company itself, a contributory, the Registrar with the Central Government's sanction, a person authorised by the Central Government, or, for the anti-State ground, the Central or a State Government, may ask the Tribunal to wind a company up, and the Tribunal must ordinarily decide within ninety days.

In exam wording: under section 272(1) a petition for winding up shall be presented by (a) the company; (b) any contributory or contributories; (c) all or any of the persons specified in clauses (a) and (b); (d) the Registrar; (e) any person authorised by the Central Government in that behalf; or (f) in a case falling under clause (b) of section 271, by the Central Government or a State Government.

Why the law has this at all

Winding up ends a legal person. That is a serious step, and the Act controls it in two ways at once: by limiting the grounds and by limiting the petitioners. The two limits work together, and each ground is matched to the petitioner who is the natural person to raise it.

The company's own decision is a matter for its members, so ground (a) is triggered by a special resolution and the natural petitioner is the company.

Conduct against the State is a public matter, so ground (b) is matched by the Central or a State Government as petitioner under s.272(1)(f).

Fraud in formation or management is discovered by inspection and investigation, so ground (c) is expressed as arising on an application by the Registrar or a person authorised by the Central Government, and it is the natural sequel to the chapters on inspection and investigation.

Persistent default in filing is a matter of the public register, so ground (d) belongs to the Registrar.

And the just and equitable ground is the members', so the natural petitioner is a contributory.

Since 2016 one class has gone from the list. A creditor is no longer a petitioner under s.272, because a creditor's remedy against a company that cannot pay is the corporate insolvency resolution process under the Insolvency and Bankruptcy Code 2016. That change should be stated at the front of any answer on this section, because the old learning about a creditor's winding up petition, statutory demands and the presumption of inability to pay is entirely displaced.

Section 271: the five grounds

(a) The company's own special resolution. Where the company has, by special resolution, resolved that the company be wound up by the Tribunal.

Note two things. It is a special resolution, a three-fourths majority of those voting. And the Tribunal still decides: the resolution gives the ground, not the order, so the Tribunal may refuse if winding up would be contrary to the interests of the company or the public.