Part VI – Settlement Of Claims

Part VII – Dissolution

Part VIII – Winding Up Of Unregistered Companies

Part IX– Offences And Penalties

Chapter VII: Special Procedure

Part I – Banking Companies

Part II – Non Banking Financial Institutions

Part III – Public Corporations And Government Companies

Chapter VIII: Cross-Border Insolvency

Chapter IX: Miscellaneous

Part VI – Settlement of Claims

98. General rule

1. The trustee shall notify the list of claims on the basis of classification of creditors on such manner as may be prescribed, specifying such time but not exceeding three weeks within which any application for revision of the claim with supportive written evidences must be submitted before the trustee.
2. The trustee shall after giving reasonable opportunity of representation for those who prefer to contest the claim notified shall finalise the list of claims on the basis of classification of creditors within four weeks after the notice period expires.

99. Debts of all descriptions to be admitted to proof (s. 528)

In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act of the law of insolvency), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as maybe subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.

100. Overriding preferential payments (s. 529A)

1. Notwithstanding anything contained in any other provision of this Code or any other law for the time being in force, in the winding up of a company, –

1. workmen’s dues; and
2. debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 97 pari passu with such dues,

shall be paid in priority to all other debts.

2. The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions.

Provided that in the case of the secured creditors agreeing to accept absolute priority to be given to financiers who have supported the reconstruction scheme during the time of reorganisation of a company such claim shall receive the top priority as agreed upon.

101. Costs of winding up (s. 520)

All costs, charges and expenses properly incurred in the winding up, including the remuneration of the trustee, shall subject to the rights of secured creditors, if any, be payable out of the assets of the company in priority to all other claims.

Provided that the Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up in such order of priority inter se as the Court thinks just.

102. Preferential payments (s. 530)

1. In a winding up, there shall be paid in priority to all other debts—

1. 1. all revenues, taxes, cesses and rates due from the company to the Central or a State government or to a local authority at the relevant date as defined in clause (c) of sub-section (8), and having become due and payable within the twelve months next before that date;
   2. all wages or salary (including wages payable for time or piece of work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date, subject to the limit specified in sub-section (2);
   3. all accrued holiday remuneration becoming payable to any employee, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution;
   4. unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation without another company all amounts due, in respect of contributions payable during the twelve months next before the relevant date, by the company as the employer of any persons, under the Employees' State Insurance Act, 1948 (34 of 1948), or any other law for the time being in force;
   5. unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in section 14 of the Workmen's Compensation Act, 1923 (8 of 1923), rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any employee of the company;
   6. all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees, maintained by the company; and
   7. the expenses of any investigation held in pursuance of section 235 or 237, in so far as they are payable by the company.

2. The sum to which priority is to be given under clause (b) of sub-section (1), shall not, in the case of any of one claimant, exceed such sum as may be notified by the Union government in the Official Gazette.
3. Where any compensation under the Workmen's Compensation Act, 1923 (8 of 1923) is a weekly payment, the amount due in respect thereof, shall for the purposes of clause (e) sub-section (1) be taken to be amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under the said Act.
4. Where any payment has been made to any employee of a company—

1. 1. on account of wages or salary; or
   2. to him, or in the case of his death, to any other person in his right, on account of accrued holiday remuneration, out of money advanced by some person for this purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in the winding up has been diminished by reason of the payment having been made.

5. The foregoing debts shall—

1. 1. rank equally among themselves and be paid in full unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and
   2. so far as the assets of the company available for payments of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject that charges.

Provided that, in respect of any money paid under any such charge, the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

6. Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to meet them, and in the case of the debts to which priority is given by clause (d) of sub-section (1), formal proof thereof shall not be required except in so far as may be otherwise prescribed.
7. In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of the winding up order, the debts to which priority given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the safe thereof:
8. For the purposes of this section—

1. any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period;
2. the expression "accrued holiday remuneration" includes, in relation to any person, all sums which, by virtue either of his contract or employment or of any enactment (including any order made or direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday; and
3. the expression "the relevant date" means—

1. 1. in the case of a company ordered to be wound up compulsorily, the date of the appointment ( or first appointment) of a provisional trustee, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and
   2. in any case where sub-clause (i) does not apply, the date of the passing the resolution for the voluntary winding up of the company.

9. This section shall not apply in the case of a winding up where the date referred to in sub-section (5) of section 230 of the Indian Companies Act, 1913 (7 of 1913), occurred before the commencement of this Code, and in such a case, the provisions relating to preferential payments which would have applied if this Code had not been passed, shall be deemed to remain in full force.

103. Fraudulent preference (s. 531)

Provided that, in relation to things made, taken or done before the commencement of this Code, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months.

1. Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditor and be invalid accordingly:
2. For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual.

104. Avoidance of voluntary transfer

Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or incumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of petition for winding up by or subject to the supervision of the Court or the passing of a resolution for voluntary winding up shall be void against the trustee.

105. Transfers for benefit of all creditors to be void (s. 532)

Any transfer or assignment by a company of all its property to any other trustee for
benefit of all its creditors shall be void.

106. Liabilities and rights of certain fraudulently preferred persons (s. 533)

1. Where, in the case of company which is being wound up, anything made, taken or done after the commencement of this Act is invalid under section 103 of a fraudulent preference of a person interested in property mortgaged or charged to secure the company's debt, then (without prejudice to any rights or liabilities arising apart from this provision), the person preferred shall be subject to same liabilities, and shall have the same rights, as if he had undertaken to be personally liable as surety for the debt, to the extent of the mortgage or charge on the property or the value of his interest, whichever is less.
2. The value of the said person's interest shall be determined as at the date of the transaction continuing the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the mortgage or charge for the company's debt was then subject.
3. On any application made to the Court with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Court shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid.

This sub-section shall apply, with the necessary modification, is relation to transactions other than the payment of money as it applies in relation to payments of money.

107. Effect of floating charge (s. 534)

Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediately preceding the commencement of the winding up, shall, unless it is proved that the company immediately after the creation of the charge was solvent be invalid, except to the amount of any cash paid to the company at the time, of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of five per cent, per annum or such other rate as may for the time being be notified by the Union government in this behalf in the Official Gazette:

Provided that in relation to a charge created more than three months before the commencement of this Code, this section shall have effect with the substitution, for references to twelve months, of references to three months.

108. Disclaimer of onerous property in case of a company which is being wound up (s. 535)

1. Where any part of the property of a company which is being wound up consists of—

1. 1. land of any tenure, burdened with onerous covenants;
   2. shares or stock in companies;
   3. unprofitable contracts;
   4. unprofitable contracts;

the trustee of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in pursuance of the contract, may, with the leave of the Court and subject to the provisions of this section, by writing signed by hi, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the Court, disclaim the property:

Provided that, where any such property has not come to the knowledge of the trustee within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereof or such extended period as may be allowed by the Court.

1. The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.
2. The Court, before or an granting leave to disclaim, may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.
3. The trustee shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the trustee has not, within a period of twenty-eight days after the receipt of the application or such extended period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim; and in case the property is a contract, if the trustee, after such an application as aforesaid, does not within the said period or extended period disclaim the contract, the company shall be deemed to have adopted it.
4. The Court may, on the application of any person who is, as against the trustee, entitled to the benefit or subject to the burden of a contract made with the company, make an order rescinding the contract on such terms as to payment by or to either party of damages for the non-performance of the contract, or otherwise as the Court thinks just; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.
5. The Court may, on an application by any person who either claims any interest in any disclaimed property or is under any liability not discharged by this Code in respect of any disclaimed property, and after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery of the property to, any person entitled thereto or to whom it may seem just that the property should be delivered by way of compensation for such liability as aforesaid, or a trustee for him, and on such terms as the Court thinks just; and on any such vesting order being made, the property comprised therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose.

Provided that where the property disclaimed is of a lease-hold nature, the Court shall not make a vesting order in favour of any person claiming under the company, whether as under-lessee or as mortgagee or holder of a charge by way of demise, except upon the terms of making that person—

1. 1. subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or
   2. if the Court thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date;

and in either event (if the case so requires) as if the lease had comprised only the property comprised in the vesting order; and any mortgagee or under-lessee declining to accept a vesting order upon such terms shall be excluded from all interest in an security upon the property, and, if there is no person claiming under the company who is willing to accept an order upon such terms, the Count shall have power to vest the estate and interest of the company in the property in any person liable, either personally or in a representative character, and either alone or jointly with the company, to perform the lessee's covenants in the lease, freed and discharged from all estates, encumbrances and interests created therein by the company.

7. Any person injured by the operation of the disclaimer under this section shall be deemed to be a creditor of the company to the amount of the compensation or damages payable in respect of the injury, and may accordingly prove the amount as a debt in the winding up.

109. Avoidance of transfers, etc., after commencement of winding up (s. 536)

1. In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the trustee, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void.
2. In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void.

110. Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court. (s. 537)

1. Where any company is being wound up by or subject to the supervision of the Court—

1. any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or
2. any sale held, without leave of the Court, of any of the properties or effects of the company after such commencement shall be void.

2. Nothing in this section applies to proceedings by the Government.

111. Notification that a company is in liquidation (s. 547)

1. Where a company is being wound up, whether by or under the supervision of the Court or voluntarily, every invoice, order for goods or business letter issued by or on behalf of the company or a trustee of the company, or a receiver or manager of the property of the company, being a document on or in which the name of the company appears, shall contain a statement that the company is being wound up.
2. If default is made in complying with this section, the company, and every one of the following persons who wilfully authorises or permits the default, namely, any officer of the company, any trustee of the company and any receiver or manager, shall be punishable with fine which may extend to five hundred rupees.

112. Unpaid dividend and undistributed asset

1. The trustee shall prepare a list of –

1. 1. dividend payable to any creditor which has remained unpaid over a period of six months; or
   2. assets refundable to any contributory which have remained undistributed for more than six months

and submit the same at the end of each financial year to the Court.

2. The Court may direct the trustee to keep the amount in a separate bank account for such time as may be directed by the court.
3. Any person claiming to be entitled to any money kept in such account may apply to the trustee who shall after reasonable inquiry, if satisfied that the person claiming is entitled to, may make payment and submit the report of such payment along with the reasons therefor to the Court.
4. On the submission of the final report, on completion of the realisation of assets and settlement of claims, any amount still remaining unpaid in this account shall be transferred to the Investors Protection Fund constituted under section 205C of the Companies Act, 1956.

Part VII – Dissolution

113. Information as to pending liquidations (s. 551)

1. If the winding up of a company is not concluded within one year after its commencement the trustee shall, within one months of the expiry of such year and thereafter until the winding up is concluded, at intervals of not more than one year or at such shorter intervals, if any, as may be prescribed, file a statement in the prescribed from and containing the prescribed particulars, with respect to the proceeding in, and position of, the liquidation—

1. in the case of a winding up by or subject to the supervision of the Court, in Court; and
2. in the case of a voluntary winding up with the Registrar

2. When the statement is filed in Court under clause (a) of subsection (1), a copy shall simultaneously be filed with the Registrar and shall be kept by him along with the other records of the company.
3. Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement, and to receive a copy thereof or an extract therefrom.
4. Any person untruthfully stating himself to be a creditor or contributory for the above purpose shall be deemed to be guilty of an offence under section 182 of the Indian Penal Code (Act 45 of 1860) and shall, on the application of the trustee, be punishable accordingly.

114. Final meeting and dissolution (s. 497)

1. As soon as the affairs of the company are fully wound up, meaning thereby that all the assets were liquidated and all the liabilities were paid off and whatever remained after paying the creditors were distributed to the share holders after meeting the winding up expenses, the trustee shall within 4 weeks —

1. 1. submit detailed account of the winding up certified by the auditor;
   2. call a general meeting of the company and submit the final report with the certified accounts of the winding up on such day and at such time and place as may be specified; and
   3. publish the final accounts and the final report in the Official Gazette and also in two newspapers having circulation in the command area of the company stating that the entire winding up procedure has been duly followed.

2. Within 1 week after the meeting, the trustee shall send to the Registrar a copy of the account, and shall make a return to him of the holding of the meeting and of the date thereof.
3. The Registrar, on receiving the account and either the return mentioned in sub-section (2) shall forthwith registrar them.
4. The Trustee shall submit a petition to the Court having jurisdiction praying for the order of the court directing the Registrar to strike off the name of the company from the name of the company, submitting a copy of the final account and final report as were registered with the Registrar. On receiving the petition, the court shall direct the Registrar to present the case and examine the issue and being satisfied that all the procedures have been complied with may give an order to the Registrar to strike off the name of company from the Register of Companies.
5. If the Trustee fails to call a general meeting of the company the court may on the petition filed by any shareholder or the Registrar, the Court may direct the Trustee to pay back to the company such sum of money as may be found reasonable to the court, subject to the maximum of total remuneration payable to the trustee.

115. Dissolution of company (s. 481)

1. When in a winding up proceedings the trustee did dispose off the entire properties of the company, distributed the whole realised amount to the creditors strictly on the basis of priority principles, the company is left out with no other assets for realisation and distribution and the final statement of account is placed before the court which the court has approved, it shall be deemed that the affairs of a company have been completely wound up.
2. When the affairs of a company have been completely wound up the court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.
3. A copy of the order shall, within fourteen days from the date thereof, be forwarded by the trustee to the Registrar who shall make in his books a minute of the dissolution of the company and shall strike off the name of the company from the register.

116. Power of Court to declare dissolution of company void (s. 559)

1. Where a company has been dissolved, whether in pursuance of this Code or of
   Section 394 of the Companies Act, 1956 or otherwise, the Court may at any time within two years of the date of the dissolution, on application by the trustee of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void; and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.
2. It shall be the duty of the person on whose application the order was made, within twenty-one days after the making of the order or such further time as the Court may allow, to file a certified copy of the order with the Registrar who shall register the same; and if such person fails so to do, he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Part VIII – Winding up of unregistered companies

117. Meaning of unregistered company (s. 582)

For the purpose of this Part, the expression "unregistered company"—

1. shall not include—

1. 1. a railway company incorporated by any Act of Parliament or other India law or any Act of Parliament of the United Kingdom;
   2. a company registered under the Companies Act 1956; or
   3. a company registered under any previous companies law and not being a
      company the registered office whereof was in Burma, Aden or Pakistan immediately before the separation of the country from India or in the State of Jammu and Kashmir immediately before the 26th January, 1950; and

2. save as aforesaid, shall include any partnership, association or company consisting of more than seven members.

118. Winding up of unregistered companies (s. 583)

1. Subject to the provisions of this Part, any unregistered company may be wound up under this Act, and all the provisions of this Code with respect to winding up shall apply to an unregistered company, with the exception and additions mentioned in sub-section (2) to (5)
2. For the purpose of determining the Court having jurisdiction in the matter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where it has a principal place of business; and the principal place of business situate in that State in which proceedings are being instituted shall for all the purposes of the winding up, be deemed to be the registered office of the company.
3. No unregistered company shall be wound up under this Code voluntarily or subject to the supervision of the Court.
4. The circumstances in which an unregistered company may be wound up are as follows:—

1. 1. if the company is dissolved, or has ceased to carry on business, or is carrying of business only for the purpose of winding up its affairs;
   2. if the company is unable to pay its debts;
   3. if the Court is of opinion that it is just and equitable that the company should be wound up.

5. An unregistered company shall, for the purposes of this Code, be deemed to be unable to pay its debts—

1. if a creditors, be assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, managing agent, secretaries and treasures manager or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor;
2. if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, for the company, or from him in his character of member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, managing agent, secretaries and treasurers, manager or principal officer of the company or by otherwise serving the same in such manner as the Court may or direct, the company has not, within ten days after service of the notice,—

1. 1. paid, secured or compounded for the debt or demand; or
   2. procured the suit or other legal proceeding to be stayed; or
   3. indemnified the defendant to his satisfaction against the suit or other legal
      proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same;

3. if execution or other process issued on a decree or order of any Court in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied in whole or in part;
4. if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.

119. Power to wind up foreign companies, although dissolved (s. 584)

Where a body corporate incorporated outside India which has been carrying on
business in India, ceases to carry on business in India, it may be wound up as an unregistered company under this Part, notwithstanding that the body corporate has been dissolved or otherwise ceased to exist as such under or by virtue of the laws of the country under which it was incorporated.

96. Contributories in winding up of unregistered company (s. 585)

1. In the event of a unregistered company being wound up, every person shall be
   deemed to be a contributory, who is liable to pay, or contribute to the payment of,—

1. any debt or liability of the company; or
2. any sum for the adjustment of the rights of the members among themselves; or
3. the costs, charges and expenses of winding up the company.

2. Every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any liability to pay or contribute as aforesaid.
3. In the event of the death or insolvency of any contributor, the provisions of this Code with respect to the legal representatives of deceased contributors, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.

121. Power to stay or restrain proceedings (s. 586)

The provisions of this Code with respect to staying and restraining suits and legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in case of an unregistered company, where the application to stay or restrain is by a creditor, extend to suits and legal proceedings against any contributory of the company.

122. Suits etc. stayed on winding up order (s. 587)

Where an order has been made for winding up an unregistered company, no suit or other legal proceeding shall be proceeded with or commenced against any contributory of the company in respect of any debt of the company, except by leave of the Court and except on such terms as the Court may impose.

123. Directions as to property in certain cases (s. 588)

1. If an unregistered company has no power to sue and be sued in a common name, or if for any reason it appears expedient, the Court may, by the winding up order or by any subsequent order, direct that all or any part of the property, movable or immovable (including actionable claims), belonging to the company or held by trustee on its behalf, shall vest in the Trustee by his official name; and thereupon the property or the part thereof specified in the order shall vest accordingly.
2. The Trustee may, after giving such indemnity, if any, as the Court may direct, bring or defend in his official name any suit or legal proceeding relating to that property, or which it is necessary to bring or defend for the purposes of effectually winding up the company and recovering its property.

124. Provisions of Part cumulative (s. 589)

1. The provisions of this Part with respect to unregistered companies shall be in addition to and not in derogation of, any provisions hereinbefore in this Code contained with respect to the winding up of companies by the Court.
2. The Court or Trustee may exercise any powers or do any act in the case of unregistered companies which might be exercised or done by the Court or Trustee in winding up companies formed and registered under this Code;

Provided that unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Part.

125. Saving and construction of enactments conferring power to wind up partnership, association or company in certain case (s. 590)

Nothing in this Part shall affect the operation of any enactment which provides for any partnership, association or company, being wound up, or being wound up as a company or as an unregistered company under the Indian Companies Act, 1913 (7 of 1913) or any Act repealed by that Act;

Provided that reference in any such enactment to any provision contained in the Indian Companies Act, 1913 (7 of 1913) or in any Act repealed by that Act shall be read as reference to the corresponding provision, if any contained in the Companies Act, 1956 or this Code.

Part IX– Offences and Penalties

126. Offences by officers of companies in liquidation (s. 538)

1. If any person, being a past or present officer of a company which, at the time of the commission of the alleged offence, is being wound up, whether by or subject to the supervision of the Court or voluntarily or which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up —

1. does not, to the best of his knowledge and belief, fully and truly discover to the trustee all the property, movable what consideration and when the company disposed of any part thereof, except such part as has been disposed of in the ordinary course of the business of the company;
2. does not deliver up to the trustee, or as he directs all such part of the movable and immovable property of the company as is in his custody or under his control, and which he is required by law to delivery up;
3. does not deliver up to the trustee, or as he directs, all such books and papers of the company as are in his custody or under his control and which he is required by law to deliver up;
4. within the twelve months next before the commencement of the winding up or at any time thereafter, conceals any part of the property of the company to the value of the one hundred rupees or upwards, or conceals any debt due to or from the company;
5. within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently removes any part of the property of the company to the value of one hundred rupees or upwards;
6. makes any material omission in any statement relating to the affairs of the company;
7. knowing or believing that a false debt has been proved by any person under the winding up, fails for a period of one month to inform the trustee thereof;
8. after the commencement of the winding up, prevents the production of any book or paper affecting or relating to the property or affairs of the company;
9. within the twelve months next before the commencement of the winding up or at any time thereafter, conceals, destroys, mutilates or falsifies, or is privy to the concealment, destruction, mutilation or falsification of, any book or paper affecting or relating to, the property or affairs of the company;
10. within the twelve months next before the commencement of the winding up or at any time thereafter makes, or is privy to the making of, any false entry in any book or paper affecting or relating to, the property or affairs of the company;
11. within the twelve months next before the commencement of the winding up or at any time thereafter, fraudulently parts with, alters or makes any omission in, or is privy to the fraudulent parting with, altering or making of any omission in, any book or paper affecting or relating to the property or affairs of the company;
12. after the commencement of the winding up or at any meeting of the creditors of the company within the twelve months next before the commencement of the winding up, attempts to account for any part of the property of the company by fictitious losses or expenses;
13. within twelve months next before the commencement of the winding up or at any time thereafter, by any false representation or other fraud, obtains on credit, for or on behalf of the company, any property which the company does not subsequently pay for;
14. within twelve months next before the commencement of the winding up or at any time thereafter, under the false pretence that the company is carrying on its business, obtains on credit, for on behalf of the company, any property which the company does not subsequently pay for;
15. within the twelve months next before the commencement of the winding up or at any time thereafter, pawns, pledges or disposes of any property of the company which has been obtained on credit and has not been paid for, unless such pawning, pledging or disposing is in the ordinary course of the business of the company; or
16. is guilty of any false representation or other fraud for the purpose of obtaining the consent of the creditors of the company or any of them, to an agreement with reference to the affairs of the company to the winding up;

he shall be punishable, in case of any of the offences mentioned in clauses (m), (n) and (o) with imprisonment for a term which may extent to five years, or with fine, or with both, and, in the case of any other offence, with imprisonment for a term which may extend to two years, or with fine, or with both:

Provided that it shall be a good defence—

1. to a charge under any of the clauses, (b), (c), (d), (f), (n) and (o), if the accused proves that he had no intent to defraud, and
2. to a charge under any of the clauses, (a), (h), (i) and (j), if he proves that he had no intent to conceal the true state of affairs of the company or to defeat the law.

1. Where any person pawns, pledges or disposes of any person in circumstances which amount to an offence under clause (o) of sub-section (1), every person who takes in pawn or pledge or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances as aforesaid, shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.
2. For the purposes of this section, the expression "officer" shall include any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

127. Penalty for falsification of books (s. 539)

If with intent to defraud or deceive any person, any officer or contributory of a company which is being wound up—

1. destroys, mutilates, alters, falsifies or secretes, or is privy to the destruction, mutilation, alteration, falsification or secreting of, any books, papers or securities; or
2. makes, or is privy to the making of, any false or fraudulent entry in any register, book of account or document belonging to the company;

he shall be punishable with imprisonment for a term which may extend to seven years, and shall be liable to fine.

128. Penalty for frauds by officers (s. 540)

If any person, being at the time of the commission of the alleged offence an officer of a company which is subsequently ordered to be wound up by the Court or which subsequently passes a resolution for voluntary winding up —

1. has, by false pretences or by means of any other fraud, induced any person to give credit to the company; or
2. with intent to defraud creditors of the company, has made or caused to be made any gift or transfer of or charge on, or has caused or connived at the levying of any execution against, the property of the company; or
3. with intent to defraud creditors of the company, has concealed or removed any part of the property of the company since the date of any unsatisfied judgement or order for payment of money obtained against the company, or within two months before the date;

he shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.

129. Liability where proper accounts not kept (s. 541)

1. Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extent to one year.
2. For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept —

1. such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid; and
2. where the business of the company has involved dealings in goods, statements of the annual stock-takings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient details to enable those goods and those buyers and sellers to be identified.

130. Liability for fraudulent conduct of business (s. 542)

On the hearing of an application under this sub-section, the Trustee or the trustee, as the case may be, may himself give evidence or call witnesses.

1. If in the course of the winding up of a company, it appears that any business of the
   company has been carried on, with intent to defraud creditors of the company or any other persons, or for any fraudulent purpose, the Court on the application of the Trustee, or the trustee or any creditor or contributory of the company, may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court may direct.
2. (a) Where the Court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration.

2. In particular, the Court may make provision for making up liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assigned from or through the person liable or any person acting on his behalf.
3. the Court may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section.
4. For the purpose of this sub-section, the expression "assignee" includes any person to whom or in whose favour, by the directories of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.

3. Where any business of a company is carried on with such intent for such purposes as mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or both.
4. This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground on which the declaration is to be made.

131. Power of Court to assess damages against delinquent directors etc. (s. 543)

1. If in the course of winding up a company, it appears that any person who was taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager, trustee or officer of the company—

1. has misapplied, or retained, or become liable or accountable for, any money or property of the company; or
2. has been guilty of any misfeasance of breach of trust in relation to the company;

the Court may, on the application of the Trustee, of the trustee, or of any creditor or contributory, made within the time specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries and treasurers, manager, trustee or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the Court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misinterpretation, retainer, misfeasance or breach of trust, as the Court thinks just.

2. An application under sub-section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the trustee in the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.
3. This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable.

132. Liability under section 542 and 543 to extend to partners or directors in firm or company (s.544)

Where a declaration under section 130 or and order under section 131 is or may be made in respect of a firm or body corporate, the Court shall also have power to make a declaration under section 130, or pass an order under section 131, as the case may be, in respect of any person who was at the relevant time a partner in that firm or a director of that body corporate.

133. Prosecution of delinquent officers and members of company (s. 545)

1. If it appears to the Court in the course of a winding up, by or subject to the supervision of, the Court, that any part or present officer, or any member, of the company has been guilty of any offence in relation to the company, the Court may, either on the application of any person interested in the winding up or of its own motion, direct the trustee either himself to prosecute the offender or to refer the matter to the Registrar.
2. If it appears to the trustee in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty of any offence in relation to the company, he shall forthwith report the matter to the Registrar and shall furnish to him such information and give to him such access to and facilities for inspecting and taking copies of any books and papers, being information or books and papers in the possession or under the control of the trustee and relating to the matter in questions, as the Registrar may require.
3. Where any report is made under sub-section (2) to the Registrar, he may, if he thinks fit, refer the matter to the Union government for further inquiry.
   
   The Union government shall thereupon investigate the matter and may, if it thinks it expedient, and apply to the Court for an order conferring on any person designated by the Union government for the purpose, with respect to the Company concerned, all such powers of investigating the affairs of the company as are provided by this Act in the case of a winding up by the Court.
4. If on any report to the Registrar under sub-section (2), it appears to him that the case is not one in which proceedings ought to be taken by him, he shall inform the trustee accordingly, and thereupon the subject to the previous sanction of the Court, the trustee may himself take proceedings against the offender.
5. If it appears to the Court in the course of a voluntary winding up that any past or present officer, or any member, of the company has been guilty as aforesaid, and that no report with respect to the matter has been made by the trustee to the Registrar under sub-section (2), the Court may, on the application of any person interested in the winding up or of its own motion, direct the trustee to make such a report, and on a report being made accordingly, the provisions of this section shall have effect as though the report had been made in pursuance of the provisions of sub-section (2).
6. If, where any matter is reported or referred to the Registrar under this section, he considers that the case is one in which a prosecution ought to be instituted, he shall report the matter to the Union government, and that Government may, after taking such legal advice as it thinks fit, direct the Registrar to institute proceedings:
   
   Provided that no report shall be made by the Registrar under this sub-section without first giving the accused person an opportunity of making a statement in writing to the Registrar and of being heard thereon.
7. When any proceedings are instituted under this section, it shall be the duty of the trustee and of every officer and agent of the company past and present (other than the defendant in the proceedings) to give all assistance in connection with the prosecution which he is reasonably also to give.
8. If any person fails on neglects to give assistance in the manner required by sub-section (7), the Court may, on the application of the Registrar, direct that person to comply with the requirements of that sub-section.
9. Where any such application is made with respect to a trustee, to the Court may, unless it appears that the failure or neglect was due to the trustee not having in his hands sufficient assets of the company to enable him so to do, direct that the cots of the application shall be borne by the trustee personally.

Chapter VII

Special Procedure

 

Part I – Banking Companies

134. Suspension of business (s. 37 of BR Act)

1. Provided that the Court may, for sufficient reasons, grant relief under this section even if the application is not accompanied by such report, and where such relief is granted, the Court shall call for a report from the Reserve Bank on the affairs of the banking company, on receipt of which it may either rescind any order already passed or pass such further orders thereon as may be just and proper in the circumstances.

   1. The Court may on the application of a banking company, which is temporarily unable to meet its obligations, make an order (a copy of which it shall cause to be forwarded to the Reserve Bank) staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it shall think fit and proper, and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.
   2. No such application shall be maintainable unless it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its debts if the application is granted:
   3. When an application is made under sub-section (1), the Court may appoint an administrator on the recommendation of the Reserve Bank of India who shall forthwith take into custody or under his control all the assets, books, documents, effects and actionable claims to which the banking company is or appears to be entitled and shall also exercise such other powers as the Court may deem fit to confer on him, having regard to the interests of the depositors of the banking company.
   4. Where the Reserve Bank is satisfied that the affairs of a banking company in respect of which an order under sub-section (1) has been made, are being conducted in a manner detrimental to the interests of the depositors, it may make an application to the Court for the winding up of the company, and where any such application is made, the Court shall not make any order extending the period for which the commencement or continuance of all actions and proceedings against the company were stayed under that sub-section.

135. Winding up by Court (s. 38)

1. Notwithstanding anything contained in Section 391, Section 392 of the Companies
   Act 1956, Section 49 and Section 118 of this Code, but without prejudice to its powers under sub-section (1) of Section 134 of this Code, the Court shall order the winding up of a banking company –

1. 1. if the banking company is unable to pay its debts; or
   2. if an application for its winding up has been made by the Reserve Bank under Section 134 or this section.

2. The Reserve Bank shall make an application under this section for the winding up of a banking company if it is directed so to do by an order under clause (b) of sub-section (4) of Section 35 of the Banking Regulation Act, 1949.
3. The Reserve Bank may make an application under this section for the winding up of a banking company :

1. 1. if the banking company-

1. 1. has failed to comply with the requirements specified in Section 11 of the Banking Regulation Act, 1949 ; or
   2. has by reason of the provisions of Section 22 of the Banking Regulation Act, 1949 become disentitled to carry on banking business in India; or
   3. has been prohibited from receiving fresh deposits by an order under clause (a) of sub-section (4) of Section 35 of the Banking Regulation Act, 1949 or under clause (b) of sub-section (3A) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) ; or
   4. having failed to comply with any requirement of this Code other than the requirements laid down in Section 11, has continued such failure, or, having contravened any provision of this Act has continued such contravention beyond such period or periods as may be specified in that behalf by the Reserve Bank from time to time, after notice in writing of such failure or contravention has been conveyed to the banking company; or

1. 2. if in the opinion of the Reserve Bank –

1. 1. 1. 1. a compromise or arrangement sanctioned by a court in respect of the banking company cannot be worked satisfactorily with or without modifications; or
         2. the returns, statements or information furnished to it under or in pursuance of the provisions of this Code disclose that the banking company is unable to pay its debts; or
         3. the continuance of the banking company is prejudicial to the interests of its depositors.

4. Without prejudice to the provisions contained in Section 11, a banking company shall be deemed to be unable to pay its debts if it has refused to meet any lawful demand made at any of its offices or branches within two working days, if such demand is made at a place where there is an office, branch or agency of the Reserve Bank, or within five working days, if such demand is made elsewhere, and if the Reserve Bank certifies in writing that the banking company is unable to pay its debts.
5. A copy of every application made by the Reserve Bank under sub-section (1) shall be sent by the Reserve Bank to the Registrar.
6. The Court may seek advice of the Reserve Bank in conducting the procedure of bankruptcy as and when required.

136. Empanelment of Trustee

Without prejudice to the provisions contained in section 16 of this Code, the Reserve Bank of India shall empanel a list of trustee to be appointed in the case of a banking institution in consultation with the Reserve Bank of India having such qualifications as may be prescribed in consultation with the Reserve Bank.

137. Appointment of trustee (s. 39)

1. Where in any proceeding for the winding up by the Court of a banking company, an application is made by the Reserve Bank in this behalf, the Reserve Bank, the State Bank of India or the Deposit Insurance Bureau or any other person from the panel of trustees of the Court shall be appointed as trustee by the court in consultation with the Reserve Bank of India.
2. Subject to such directions as may be made by the Court, the court shall fix the remuneration of the trustee appointed under this section, on the basis of the percentage of realisation of assets and disbursement of claims keeping in view the cost and expenses of the winding up shall be borne by the trustee out of the amount receivable by the trustee.

138. Stay of proceedings (s. 40)

Notwithstanding anything to the contrary contained in Section 68 of this Code, the Court shall not make any order staying the proceedings in relation to the winding up of a banking company unless the Court is satisfied that an arrangement has been made whereby the company can pay its depositors in full as their claims accrue.

139. Preliminary report by trustee (s. 41)

1. Where a winding up order has been made in respect of a banking company whether before or after the commencement of this Code, the trustee shall submit a preliminary report to the Court within two months from the date of the winding up order or where the winding up order has been made before such commencement, within two months from such commencement, giving the following information:

1. 1. information required under section 24 of this code;
   2. the amount of assets which are in cash in his custody or under his control; and
   3. the amount of assets which are likely to be collected in cash within a period of two months in order to make preferential payments and in discharge, as far as possible, of liabilities and obligation of the banking company to depositors and other creditors.

2. The trustee shall make all efforts to dispose of as much as assets as possible and collect cash as speedily as possible to dispose off the liability and meet the obligation as speedily as possible.

140. Notice to preferential claimants and secured and unsecured creditors (s. 41 A)

1. Within fifteen days from the date of the winding up order of a banking company or where the winding up order has been made before the commencement of this Code, within one month from such commencement, the trustee shall, for the purpose of making an estimate of the debts and liabilities of the banking company (other than its liabilities and obligations to its depositors), by notice served in such manner as the Reserve Bank may direct, call upon-

1. 1. every claimant entitled to preferential payment under Sections 100 and 102 of this Code and
   2. every secured and every unsecured creditor,

to send to the trustee within one month from the date of the service of the notice a statement of the amount claimed by him.

2. Every notice under sub-section (1) sent to a claimant having a claim under Sections 100 and 102 of this Code, shall state that if a statement of the claim is not sent to the trustee before the expiry of the period of one month from the date of the service, the claim shall not be treated as a claim entitled to be paid under Sections 100 and 102 of this Code, in priority to all other debts but shall be treated as an ordinary debt due by the banking company.
3. Every notice under sub-section (1) sent to a secured creditor shall require him to value his security before the expiry of the period of one month from the date of the service of the notice and shall state that if a statement of the claim together with the valuation of the security is not sent to the Trustee, before the expiry of the said period, then, the trustee shall himself value the security and such valuation shall be binding on the creditor.
4. If a claimant fails to comply with the notice sent to him under sub-section (1), his claim will not be entitled to be paid under Sections 100 and 102 of this Code, in priority to all other debts but shall be treated as an ordinary debt due by the banking company; and if a secured creditor fails to comply with the notice sent to him under sub-section (1), the trustee shall himself value the security and such valuation shall be binding on the creditor.

141. Power to dispense with meetings of creditors, etc. (s. 42)

Notwithstanding anything to the contrary contained in this Code, the Court may, in the proceedings for winding up a banking company, dispense with any meeting of creditors or contributories if it considers that no object will be secured thereby sufficient to justify the delay and expense.

142. Booked depositors' credits to be deemed proved (s.43)

In any proceeding for the winding up of a banking company, every depositor of the banking company shall be deemed to have filed his claim for the amount shown in the books of the banking company as standing to his credit and, notwithstanding anything to the contrary contained in Section 77 of this Code, the Court shall presume such claims to have been proved, unless the trustee shows that there is reason for doubting its correctness.

143. Preferential payments to depositors (s. 43 A)

1. In every proceeding for the winding up of a banking company where a winding up order has been made, whether before or after the commencement of this Code, within three months from the date of the winding up order or where the winding up order has been made before such commencement, within three months therefrom, the preferential payments referred to in Sections 100 and 102 of this Code, in respect of which statements of claims have been sent within one month from the date of the service of the notice referred to in Section 140, shall be made by the trustee or adequate provision for such payments shall be made by him.
2. After the preferential payments as aforesaid have been made or adequate provision has been made in respect thereof, there shall be paid within the aforesaid period of three months:

1. 1. in the first place, to every depositor in the savings bank account of the banking company a sum of two hundred and fifty rupees or the balance at his credit, whichever is less; and thereafter;
   2. in the next place, to every other depositor of the banking company a sum of two hundred and fifty rupees or the balance at his credit, whichever is less,

in priority to all other debts from out of the remaining assets of the banking company available for payment to general creditors :

Provided that the sum total of the amounts paid under clause (a) and clause (b) to anyone person who in his own name (and not jointly with any other person) is a depositor in the savings bank account of the banking company and also a depositor in any other account, shall not exceed the sum of two hundred and fifty rupees.

3. Where within the aforesaid periods of three months full payment cannot be made of the amounts required to be paid under clause (a) or clause (b) of sub-section (2) with the assets in cash, the trustee shall pay within that period to every depositor under clause (a) or, as the case may be, Clause (b) of that sub-section on a pro rata basis so much of the amount due to the depositor under that clause as the trustee is able to pay with those assets; and shall pay the rest of that amount to every such depositor as and when sufficient assets are collected by the trustee in cash.
4. After payments have been made first to depositors in the savings bank account and then to the other depositors in accordance with the foregoing provisions, the remaining assets of the banking company available for payment to general creditors shall be utilised for payment on a pro rata basis of the debts of the general creditors and of the further sums, in any, due to the depositors; and after making adequate provision for payment on a pro rata basis as aforesaid of the debts of the general creditors, the trustee shall, as and when the assets of the company are collected in cash, make payment on a pro rata basis as aforesaid, of the further sums, if any, which may remain due to the depositors referred to in clause (b) of sub-section (2).
5. In order to enable the trustee to have in his custody or under his control in cash as much of the assets of the banking company as possible, the securities given to every secured creditor may be redeemed by the trustee:

1. 1. where the amount due to the creditor is more than the value of the securities as assessed by him or, as the case may be, as assessed by the trustee, on payment of such value; and
   2. where the amount due to the creditor is equal to or less than the value of the securities as so assessed, on payment of the amount due:

Provided that where the trustee is not satisfied with the valuation made by the creditor, he may apply to the Court for making a valuation.

6. When any claimant, creditor or depositor to whom any payment is to be made in accordance with the provisions of this section, cannot be found or is not readily traceable, adequate provision shall be made by the trustee for such payment.
7. For the purpose of this section, the payments specified in each of the following clauses shall be treated as payments of a different class, namely :-

1. 1. payments to preferential claimants under Sections 100 and 102 of this Code;
   2. payments under clause (a) of sub-section (2) of the depositors in the savings bank account;
   3. payments under clause (b) of sub-section (2) to the other depositors;
   4. payment to the general creditors and payments to the depositors in addition to those specified in clause (a) and clause (b) of sub-section (2).

8. The payments of each different class specified in sub-section (7) shall rank equally among themselves and be paid in full unless the assets are, insufficient to meet them, in which case they shall abate in equal proportion.
9. Nothing contained in sub-sections (2), (3), (4), (7) and (8) shall apply to a banking company in respect of the depositors of which the Deposit Insurance Corporation is liable under Section 16 of the Deposit Insurance Corporation Act, 1961 (47 of 1961).
10. After preferential payments referred to in sub-section (1) have been made or adequate provision has been made in respect thereof, the remaining assets of the banking company referred to in sub-section (9) available for payment to general creditors shall be utilised for payment on pro rata basis of the debts of the general creditors and of the sums due to the depositors:

Provided that where any amount in respect of any deposit is to be paid by the trustee to the Deposit Insurance Corporation under Section 21 of the Deposit Insurance Corporation Act, 1961 (47 of 1961), only the balance, if any, left after making the said payment shall be payable to the depositor.

144. Powers of Court in voluntary winding up (s. 44)

1. Notwithstanding anything to the contrary contained in Section 84 of this Code, no banking company may be voluntarily wound up unless the Reserve Bank certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue.
2. The Court may, in any case where a banking company is being wound up voluntarily, make an order that the voluntary winding up shall continue, but subject to the supervision of the Court.
3. Without prejudice to the provisions contained in Section 54 of this Code, the Court may of its own motion and shall on the application of the Reserve Bank, order the winding up of a banking company by the Court in any of the following cases, namely:

1. where the banking company is being wound up voluntarily and at any stage during the voluntary winding up proceedings the company is not able to meet its debts as they accrue; or
2. where the banking company is being wound up voluntarily or is being wound up subject to the supervision of the Court and the Court is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued without detriment to the interests of the depositors.

145. Power of Court to decide all claims in respect of banking companies (s. 45B)

This Court shall, save as otherwise expressly provided in Section 144, have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in India) or any application made under Section 391 of the Companies Act, 1956 (1 of 1956) by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of banking company.

146. Transfer of pending proceedings (s. 45C)

1. Where a winding up order is made or has been made in respect of a banking company, all suits or other legal proceeding, whether civil or criminal, in respect of which the Court has jurisdiction under this Code and which is pending in any other court immediately before the commencement of this Code, shall be transferred to the Court.
2. The trustee shall, within three months from the date of the winding up order or commencement of this Code, whichever is later, or such further time as the Court may allow, submit to the Court a report containing a list of all such pending proceedings together with particulars thereof.
3. Nothing in this section shall apply to any proceeding pending in appeal before the Supreme Court or a Court.

147. Settlement of list of debtors (s. 45D)

Provided that such lists may, with the leave of the Court, be filed after the expiry of the said period six months.

Provided that nothing in this section shall debar the Court from settling any such list in part as against such of the persons whose debts have been settled without settling the debts of all the persons placed on the list.

Provided that the Court may, if it so thinks fit, entertain the application after the expiry of the said period of thirty days.

1. Notwithstanding anything to the contrary contained in any law for the time being in force, the Court may, settle in the manner hereinafter provided a list of debtors of a banking company which is being wound up.
2. Subject to any rules that may be made under Section 52 of the Banking Regulation Act, 1949, the trustee shall, within six months from the date of the winding up order or the commencement of this Code, whichever is later, from time to time, file to the Court lists of debtors containing such particulars as are specified in the Fourth Schedule:
3. On receipt of any list under sub-section (2), the Court shall, wherever necessary, cause notices to be issued on all persons affected and after making an inquiry in such manner as may be provided by rules made by the Court, it shall make an order settling the list of debtors:
4. At the time of the settlement of any such list, the Court shall pass an order for the payment of the amount due by each debtor and make such further orders as may be necessary in respect of the relief claimed, including reliefs against any guarantor or in respect of the realisation of any security.
5. Every such order shall, subject to the provisions for appeal, be final and binding for all purposes as between the banking company on the one hand and the person against whom the order is passed and all persons claiming through or under him on the other hand, and shall be deemed to be a decree in a suit.
6. In respect of every such order, the Court shall issue a certificate specifying clearly the reliefs granted and the names and descriptions of the parties against whom such reliefs have been granted, the amount of costs awarded and by whom, and out of what funds and in what proportions, such costs are to be paid; and every such certificate shall be deemed to be a certified copy of the decree for all purposes including execution.
7. At the time of settling the list of debtors or at any other time prior or subsequent thereto, the Court shall have power to pass any order in respect of a debtor on the application of the trustee for the realisation, management, protection, preservation or sale of any property given as security to the banking company and to give such powers to the trustee to carry out the aforesaid directions as the Court thinks fit.
8. The Court shall have power to sanction a compromise in respect of any debt and to order the payment of any debt by installments.
9. In any case in which any such list is settled ex parte as against any person, such person may, within thirty days from the date of the order settling the list, apply to the Court for an order to vary such list, so far as it concerns him, and if the Court is satisfied that he was prevented by any sufficient cause from appearing on the date fixed for the settlement of such list and that he has a good defence to the claim of the banking company on merits, the Court may vary the list and pass such orders in relation thereto as it thinks fit:
10. Nothing in this section shall –

1. apply to a debt which has been secured by a mortgage of immovable property , if a third party has any interest in such immovable property ; or
2. prejudice the rights of the trustee to recover any debt due to a banking company under any other law for the time being in force.

148. Special provisions to make calls on contributories (s. 45E)

Notwithstanding that the list of the contributories has not been settled under this Code, the Court may, if it appears to it necessary or expedient to so do, at any time after making a winding up order, make a call on and order payment thereof by any contributory under sub-section (1) of Section 75 of this Code, if such contributory has been placed on the list of contributories by the trustee and has not appeared to dispute his liability.

149. Documents of banking company to be evidence (s. 45F)

1. Entries in the books of account or other documents including electronically maintained and communicated documents of a banking company which is being wound up shall be admitted in evidence in all legal proceedings and all such entries may be proved either by the production of the books of account or other documents of the banking company containing such entries or by the production of a copy of the entries, certified by the trustee under his signature and stating that it is a true copy of the original entries and that such original entries are contained in the books of account or other documents including electronically maintained and communicated documents of the banking company in his possession.
2. Notwithstanding anything to the contrary contained in the Indian Evidence Act, 1872 (1 of 1872), all such entries in the books of account or other documents, including electronically maintained and communicated documents, of a banking company shall, as against the Directors [officers and other employees] of the banking company in respect of which the winding up order has been made, be prima facie evidence of the truth of all matters purporting to be therein recorded.

150. Public examination of Directors and Auditors (s. 45G)

Provided that no such person shall be publicly examined unless he has been given an opportunity to show cause why he should not be so examined.

Provided that if he is, in the opinion of the Court, exculpated from any charges made or suggested against him, the Court may allow him such costs in its discretion as it may deem fit.

1. Where an order has been made for the winding up of a banking company, the trustee shall submit a report whether in his opinion any loss has been caused to the banking company since its formation by any act or omission (whether or not a fraud has been committed by such act or omission) or any person in the promotion or formation of the banking company or of any Director or Auditor of the banking company.
2. If, on consideration of the report submitted under sub-section (1), the Court is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a Director or an Auditor of the banking company should be publicly examined, it shall hold a public sitting on a date to be appointed for that purpose and direct that such person, Director or Auditor shall attend thereat and shall be publicly examined as to the promotion or formation or the conduct of the business of the banking company, or as to his conduct and dealings, in so far as they relate to the affairs of the banking company:
3. The trustee shall take part in the examination and for that purpose may, if specially authorised by the Court in that behalf employ such legal assistance as may be sanctioned by the Court.
4. Any creditor or contributory may also take part in the examination either personally or by any person entitled to appear before the Court.
5. The Court may put such questions to the person examined as it thinks fit.
6. The person examined shall be examined on oath and shall answer all such questions as the Court may put or allow to be put to him.
7. A person ordered to be examined under this section may, at his own cost, employ any person entitled to appear before the Court who shall be at liberty to put to him such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answer given. by him:
8. Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined and may thereafter be used in evidence against him in any proceeding, civil or criminal, and shall be open to the inspection of any creditor or contributory at all reasonable times.
9. Where on such examination, the Court is of opinion (whether a fraud has been committed or not):

1. 1. that a person, who has been a Director of the banking company, is not fit to be a Director of a company, or
   2. that a person, who has been an Auditor of the banking company or a partner of a firm acting as such Auditor, is not fit to act as an Auditor of a company or to be a partner of a firm acting as such Auditor,

the Court may make an order that person shall not, without the leave of the Court, be a Director of or in any way, whether directly or indirectly, be concerned or take part in the management of any company or, as the case may be, act as an Auditor of, or be a partner of a firm acting as Auditors of, any company for such period not exceeding five years as may be specified in the order.

151. Special provisions for assessing damages against delinquent on Directors, etc. (s. 45H)

Provided that where such an order is made jointly against two or more such persons, they shall be jointly and severally liable to make the repayment or r restoration of the money or property.

1. Where an application is made to the Court under Section 131 of this Code against any promoter, Director, Manager, Trustee or Officer of a banking company for repayment or restoration of any money or property and the applicant makes out a prima facie case against such person, the Court shall make an order against such person to repay and restore the money or property unless he proves that he is not liable to make the repayment or restoration either wholly or in part:
2. Where an application is made to the Court under Section 131 of this and the Court has reason to believe that a property belongs to any promoter, Director, Manager, Trustee or Officer of the banking company, whether the property stands in the name of such person or any other person as an ostensible owner, then the Court may, at any time, whether before or after making an order under III sub-section (1), direct the attachment of such property, or such portion thereof, as it thinks fit and the property so attached shall remain subject to an attachment unless the ostensible owner can prove to the satisfaction of the Court that he is the real owner and the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to attachment of property shall, as far as may be, apply to such attachment.

152. Duty of Directors and Officers of banking company to assist in the realisation of property (s. 45 I)

Every Director or other officer of a banking company may reasonably require in connection with the realisation and distribution of the property of the banking company.

153. Special provisions for punishing offences in relation to banking companies being wound up (s. 45 J)

Provided that the offence is one punishable under this Code or under the Companies Act, 1956 (1 of 1956),

1. The Court may, if it thinks fit, take cognizance of and try in a summary way any offence alleged to have been committed by any person who has taken part in the promotion or formation of the banking company which is being wound up or by any Director, Manager or Officer thereof:
2. When trying any such offence as aforesaid, the Court may also try any other offence not referred to in sub-section (1) which is an offence with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974), be charged at the same trial.

(3) In any case tried summarily under sub-section (1), the Court-

1. 1. need not summon any witness, if it is satisfied that the evidence of such witness will not be material;
   2. shall not be bound to adjourn a trial for any purpose unless such adjournment is, in the opinion of the Court, necessary in the interests of justice;
   3. shall, before passing any sentence, record judgement embodying the substance of the evidence and also the particulars specified in Section 263 of the Code of Criminal Procedure, 1973 (2 of 1974), so far as that section may be applicable,

and nothing contained in sub-section (2) of Section 262 of the Code of Criminal Procedure, 1973, shall apply to any such trial.

4. All offences in relation to winding up alleged to have been committed by any person specified in sub-section (1) which are punishable under this Code or under the Companies Act, 1956 (1 of 1956), and which are not tried in a summary way under sub-section (1) shall, notwithstanding anything to the contrary contained in that Act or the Code of Criminal Procedure, 1973 (2 of 1974), or in any other law for the time being in force, be taken cognizance of and tried by a Judge of the Court other than the Judge for the time being dealing with the proceedings for the winding up of the banking company.
5. Notwithstanding anything to the contrary contained in the Code of Criminal Procedure, 1973(2 of 1973), the Court may take cognizance of any offence under this section, without the accused being committed to it for trial.

154. Public examination of Directors and Auditors, etc., in respect of banking company under schemes of arrangement (s. 45 L)

1. Where an application for sanctioning a compromise or arrangement in respect of a banking company is made under Section 391 of the Companies Act, 1956 (1 of 1956)], or where such sanction has been given and the Court is of opinion, whether on a report of the Reserve Bank or otherwise, that any person who has taken part in the promotion or formation of the banking company or has been a Director or Auditor of the banking company should be publicly examined, it may direct such examination of such person the provisions of Section 150 shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up.
2. Where a compromise or arrangement is sanctioned under Section 391 of the Companies Act, 1956 (1 of 1956), in respect of a banking company, the provisions of Section 131 and 151 of this Code shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the compromise or, arrangement were an order for the winding up of the banking company.
3. Where a scheme of reconstruction or amalgamation of a banking company has been sanctioned by the Union government under Section 45 of the Banking Regulation Act, 1949 and the Union government is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a Director or a Auditor of the banking company should be publicly examined, that Government may apply to the Court for the examination of such person and if on such examination the Court finds (whether a fraud has been committed or not ) that person is not fit to be a Director of a company or to act as an Auditor of a company or to be a partner of a firm acting as such Auditors, the Union government shall make an order that the person shall not, without the leave of the Union government, be a Director of, or in any way, whether directly or indirectly, be concerned or take part in the management of any company or, as the case may be, act as an Auditor of, or be a partner of a firm acting as Auditor of, any company for such period not exceeding five years as may be specified ill the order.
4. Where a scheme or reconstruction or amalgamation of a banking company has been sanctioned by the Union government under Section 45 of the Banking Regulation Act, 1949, the provisions of Section 131 and 151 of this Code shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the scheme of reconstruction or amalgamation, as the case may be, were an order for the winding up of the banking company; and any reference in the said Section 131 to the application of the trustee shall be construed as a reference to the application of the Union government.

155. Special provisions for banking companies working under schemes of arrangement at the commencement of the Amendment Act (s. 45 M)

Where any compromise or arrangement sanctioned in respect of a banking company under Section 391 of the Companies Act, 1956 (1 of 1956) is being worked at the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), the Court may, if it so thinks fit, on the application of such banking company, -

1. 1. excuse any delay in carrying out any of the compromise or arrangement; or
   2. allow the banking company to settle the list of its debtors in accordance with the provisions of Section 147 and in such a case, the provisions of the said section shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the compromise or arrangement were an order for the winding up of the banking company.

156. Appeals (s. 45N)

1. An appeal shall lie from any order or decision of the Court in a civil proceeding under this Act when the amount or value of the subject matter of the claim exceeds five thousand rupees.
2. The Court may by rules provide for an appeal against any order made under Section 153 and the conditions subject to which any such appeal would lie.
3. Subject to the provisions of sub-section (1) and sub-section (2) and notwithstanding anything contained in any other law for the time being in force, every order or decision of the Court shall be final and binding for all purposes as between the banking company on the one hand, and all persons who are parties thereto and all persons claiming through or under them or any of them, on the other hand.

157. Special period of limitation (s. 45 O)

1. Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded.
2. Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or (1 of 1956) or in any other law for the time being in force, there shall be no period of limitation for the recovery of arrears of calls from any Director of a banking company which is being wound up or for the enforcement by the banking company against any of its Directors of any claim based on a contract, express or implied; and in respect of all other claims by the banking company against its Directors, the period of limitation shall be twelve years from the date of the accrual of such claims or five years from the date of the first appointment of the trustee, whichever is longer.
3. The provisions of this section, in so far as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of this Code.

158. Reserve Bank to tender advice in winding up proceedings (s. 45 P)

Where in any proceeding for the winding up of a banking company in which any person other than the Reserve Bank has been appointed as the trustee and the Court has directed the trustee to obtain the advice of the Reserve Bank on any matter (which it is hereby empowered to do), it shall be lawful for the Reserve Bank to examine the record of any such proceeding and tender such advice on the matter as it may think fit.

159. Power to inspect (s. 45 Q)

1. The Reserve Bank shall, on being directed so to do by the Union government or by the Court, cause an inspection to be made by one or more of its officers of a banking company which is being wound up and its books and accounts.
2. On such inspection, the Reserve Bank shall submit its report to the Union government and the Court.
3. If the Union government, on consideration of the report of the Reserve Bank, is of opinion that there has been a substantial irregularity in the winding up proceedings, it may bring such irregularity to the notice of the Court for such action as the Court may think fit.
4. On receipt of the report of the Reserve Bank under sub-section (2) or on any irregularity being brought to its notice by the Union government under sub-section (3), the Court may, if it deems fit, after giving notice to and hearing the Union government in regard to the report, give such directions as it may consider necessary.

160. Power to call for returns and information (s. 45 R)

The Reserve Bank may, at any time by a notice in writing, require the trustee of a banking company to furnish it, within such time as may be specified in the notice or such further time as the Reserve Bank may allow, any statement or information relating to or connected with the winding up of the banking company; and it shall be the duty of every trustee to comply with such requirements.

Explanation.-For the purposes of this section and Section 159, a banking company working under a compromise or arrangement but prohibited from receiving fresh deposits, shall, as far as may be, be deemed to be a banking company which is being wound up.

161. Chief Presidency Magistrate and District Magistrate to assist trustee in taking charge of property of banking company banking wound up (s. 45S)

1. For the purpose of enabling the trustee or the special officer appointed under sub-section (3) of Section 134 to take into his custody or under his control, all property, effects and actionable claims to which a banking company is or appears to be entitled, the trustee or the special officer, as the case may be, may request in writing the Chief Metropolitan Magistrate or the Chief Judicial Magistrate, within whose jurisdiction any property, books of account or other documents of Such banking company may be situate or be found, to take possession thereof, and the Chief Metropolitan Magistrate or the Chief Judicial Magistrate, as the case may be, shall, on such request being made to him:-

1. 1. take possession of such property , books of accounts or other , documents, and
   2. forward them to the trustee or the special officer.

Provided that such sale shall, as far as practicable, be effected by public auction.

2. Where any such property and effects are in the possession of the Chief Metropolitan Magistrate or the Chief Judicial Magistrate, as the case may be, such Magistrate shall, on request in writing being made to him by the official trustee or the special officer referred to in sub-section (1), sell such property and effects and forward the net proceeds of the sale to the trustee or the special officer:
3. For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the Chief Judicial, Magistrate may take or cause to be taken such steps and use or cause to be used such force as may, in his opinion, be necessary.
4. No act of the Chief Metropolitan Magistrate or the Chief Judicial Magistrate done in pursuance of this section shall be called in question in any court or before any authority.

162. Enforcement of orders and decisions of Court (s. 45 T)

1. All orders made in a civil proceeding by a Court may be enforced in the same manner in which decrees of such court made in any suit pending therein may be banking enforced.
2. Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908 (5 of 1908), a trustee may apply for the execution of a decree by a court other than the one which made it on production of a certificate granted under sub-section (6) of Section 147 and on his certificate to such other court in writing the amount remaining due or relief remaining unenforced under any the decree.
3. Without prejudice to the provisions of sub-section (1) or sub-section (2), the any amount found due to the banking company by an order or decision of the of Court may, with the leave of the Court, be recovered by the be trustee in the same manlier as an arrear of land revenue and for the purpose he of such recovery the trustee may forward to the Collector within whose jurisdiction the property of the person against whom any order or decision of the Court as been made is situate, certificate under his signature specifying the amount so due and the person by whom it is payable.
4. On receipt of a certificate under sub-section (3), the Collector shall proceed to recover from such person the amount specified therein as if it were an arrear of land revenue:

Provided that without prejudice to any other powers of the Collector, he shall, for the purposes, of recovering the said amount, have all the powers, which, under the Code of Civil Procedure, 1908 (5 of 1908), a civil court has for the purpose of the recovery of an amount due under a decree.

163. References to Directors, etc., shall be construed as including references to past Directors, etc. (s. 45 V)

For the removal of doubts it is hereby declared that any reference in this Chapter to a Director, Manager, Trustee, Officer or Auditor of a banking company shall be construed as including a reference to any past or present Director, Manager, Trustee, Officer or Auditor of the banking company.

164. Part II of Banking Regulation Act 1949 not to apply to banking companies being wound up (s. 45 W)

Nothing contained in Part II of Banking Regulation Act 1949 shall apply to a banking company which is being wound up.

165. Validation of certain proceedings (s. 45 X)

Notwithstanding anything contained in Section 145 or in Section 11 of the Banking Companies (Amendment) Act, 1950 (20 of 1950), no proceeding held, judgment delivered or decree or order made before the commencement of this Code, by any Court other than the Court in respect of any matter over which the Court has jurisdiction under this Act shall be invalid or be deemed ever to have been invalid merely by reason of the fact that such proceeding, judgment, decree or order was held, delivered or made by a Court other than the Court.

Part II – Non banking financial institutions

166. Bankruptcy and winding up proceedings

The court shall follow the special procedure mentioned for banking institutions for conducting winding up proceedings of non banking financial institutions as far as possible, including procedure for appointment of trustee.

167. Insurance company

In the event of bankruptcy or winding up of an insurance company the court shall follow the special procedure as far as practicable with a proviso that the trustee shall be appointed in consultation with the Insurance Regulatory and Development Authority.

Part III – Public Corporations and Government Companies

168. Bankruptcy and Winding Up Proceedings

In the event of bankruptcy or winding up of a public corporations and government companies, the court shall follow the same procedure as far as possible as if it is only a public limited company.

Chapter VIII

Cross-border Insolvency

169. Scope of application of this chapter

This Chapter applies where:

1. assistance is sought in India by a foreign court or a foreign representative in connection with foreign proceedings; or
2. assistance is sought in a foreign State in connection with proceedings under the laws of India relating to insolvency; or
3. foreign proceedings and proceedings under the laws of India relating to insolvency in respect of the same debtor are taking place concurrently; or
4. creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participating in, proceedings under the laws of India relating to insolvency.

170. International obligations of India

To the extent that this Chapter conflicts with an obligation of India arising out of any treaty or other form of agreement to which it is a party with one or more other States, the requirements of the treaty or agreement prevail.

171. Court

The functions referred to in this Chapter relating to recognition of foreign proceedings and co-operation with foreign courts shall be performed by the Court.

 

172. Authorisation of Trustee to act in a foreign State

A trustee is authorized to act in a foreign State on behalf of a proceeding under this Code, as permitted by the applicable foreign law.

173. Public policy exception

Nothing in this Chapter prevents the court from refusing to take an action governed by this Chapter if the action would be manifestly contrary to the public policy of India.

174. Additional assistance under other laws

Nothing in this Chapter limits the power of a court or a Trustee to provide additional assistance to a foreign representative under other laws of India.

175. Right of direct access

A foreign representative is entitled to apply directly to a court in India.

176. Limited jurisdiction

The sole fact that an application pursuant to this Chapter is made to a court in India by a foreign representative does not subject the foreign representative or the foreign assets and affairs of the debtor to the jurisdiction of the courts of India for any purpose other than the application.

 

177. Application by a foreign representative to commence a proceeding under this code

A foreign representative is entitled to apply to commence a proceeding under this Code if the conditions for commencing such a proceeding are otherwise met.

178. Participation of a foreign representative in a proceeding under this Code

Upon recognition of a foreign proceeding, the foreign representative is entitled to participate in a proceeding regarding the debtor under this Code.

 

179. Access of foreign creditors to a proceeding under this Code

Foreign creditors have the same rights regarding the commencement of, and participation in, a proceeding under this Code as creditors in India based on the priorities determined by the contract.

180. Notification to foreign creditors of a proceeding under this Code

1. Whenever under this Code notification is to be given to creditors in India, such notification shall also be given to the known creditors that do not have addresses in India. The court may order that appropriate steps be taken with a view to notifying any creditor whose address is not yet known.
2. Such notification shall be made to the foreign creditors individually, unless the court considers that, under the circumstances, some other form of notification would be more appropriate. No letters rogatory or other, similar formality is required.
3. When a notification of commencement of a proceeding is to be given to foreign creditors, the notification shall:

(a) Indicate a reasonable time period for filing claims and specify the place for their filing;

(b) Indicate whether secured creditors need to file their secured claims; and

(c) Contain any other information required to be included in such a notification to creditors pursuant to the law of India and the orders of the court.

181. Application for recognition of a foreign proceeding

(a) A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or

(b) A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or

(c) In the absence of evidence referred to in sub-clauses (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative.

1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed.
2. An application for recognition shall be accompanied by:
3. An application for recognition shall also be accompanied by a statement identifying all foreign proceedings in respect of the debtor that are known to the foreign representative.
4. The court may require a translation of documents, if the documents are not written in English, supplied in support of the application for recognition, in English.

182. Presumptions concerning recognition

1. If the decision or certificate referred to in subsection (2) of section 181 indicates that the foreign proceeding is a proceeding within the meaning of subsection (24) of section 3 and that the foreign representative is a person or body within the meaning of subsection (25) of section 3, the court is entitled to so presume.
2. The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised.
3. In the absence of proof to the contrary, the debtor’s registered office is presumed to be the centre of the debtor’s main interests.

183. Decision to recognise a foreign proceeding

(1) Subject to public policy exception, a foreign proceeding shall be recognised if:

(a) The foreign proceeding is a proceeding as defined under this Code;

(b) The foreign representative applying for recognition is a person or body as defined under this Code;

(c) The application meets the requirements of subsection (2) of section 181; and

(d) The application has been submitted to the Court.

(2) The foreign proceeding shall be recognised:

(a) As a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or

(b) As a foreign non-main proceeding if the debtor has an establishment within the meaning of subsection (23) of section 3 in the foreign State.

3. An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time.
4. The provisions of sections 181, 182, 183 and 184 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have ceased to exist.

184. Subsequent information

From the time of filing the application for recognition of the foreign proceeding, the foreign representative shall inform the court promptly of:

(a) Any substantial change in the status of the recognised foreign proceeding or the status of the foreign representative’s appointment; and

(b) Any other foreign proceeding regarding the same debtor that becomes known to the foreign representative.

 

185. Relief that may be granted upon application for recognition of a foreign proceeding

 

(a) Staying execution against the debtor’s assets;

(b) Entrusting the administration or realisation of all or part of the debtor’s assets located in India to the foreign representative or another person designated by the court, in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy;

(c) Any relief mentioned in subsection (1) (c), (d) and (g) of section 187.

 

• Unless extended under subsection (1) (f) of section 187, the relief granted under this section terminates when the application for recognition is decided upon.

• The court may refuse to grant relief under this section if such relief would interfere with the administration of a foreign main proceeding.

186. Effects of recognition of a foreign main proceeding

(1) Upon recognition of a foreign proceeding that is a foreign main proceeding,

(a) Commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed;

(b) Execution against the debtor’s assets is stayed; and

(c) The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.

 

1. The scope, and the modification or termination, of the stay and suspension referred to in subsection 1 are subject to provisions exceptions, limitations, modifications or terminations as provided in this Code.
2. Subsection 1 (a) shall not affect the right to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor.
3. Subsection 1 shall not affect the right to request the commencement of a proceeding under this Code or the right to file claims in such a proceeding.

187. Relief that may be granted upon recognition of a foreign proceeding

(a) Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities, to the extent they have not been stayed under subsection (1) (a) of section 186;

(b) Staying execution against the debtor’s assets to the extent it has not been stayed under subsection (1) (b) of section 186;

(c) Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under subsection (1) (c) of section 186;

(d) Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities;

(e) Entrusting the administration or realisation of all or part of the debtor’s assets located in India to the foreign representative or another person designated by the court;

(f) Extending relief granted under subsection (1) of article 185;

(g) Granting any additional relief that may be available to the Trustee under this Code.

• Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in India to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in India are adequately protected.

• In granting relief under this section to a representative of a foreign non-main proceeding, the court must be satisfied that the relief relates to assets that, under the law of India, should be administered in the foreign non-main proceeding or concerns information required in that proceeding.

188. Protection of creditors and other interested persons

1. In granting or denying relief under section 185 or 187, or in modifying or terminating relief under subsection (3) of this section, the court must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected.
2. The court may subject relief granted under section 185 or 187 to conditions it considers appropriate.
3. The court may, at the request of the foreign representative or a person affected by relief granted under section 185 or 187, or at its own motion, modify or terminate such relief.

189. Actions to avoid acts detrimental to creditors

1. Upon recognition of a foreign proceeding, the foreign representative has standing to initiate bankruptcy proceedings against the debtor.
2. When the foreign proceeding is a foreign non-main proceeding, the court must be satisfied that the action relates to assets that, under the law of India, should be administered in the foreign non-main proceeding.

190. Intervention by a foreign representative in proceedings in India

Upon recognition of a foreign proceeding, the foreign representative may, provided the requirements of the law of India are met, intervene in any proceedings in which the debtor is a party.

191. Co-operation and direct communication between a court of India and foreign courts or foreign representatives

1. In matters referred to in section 169, the court shall co-operate with foreign courts or foreign representatives, either directly or through the Trustee.
2. The court may communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives.

 

192. Co-operation and direct communication between the Trustee and foreign courts or foreign representatives

1. In matters referred to in section 169, the Trustee shall, in the exercise of his functions and subject to the supervision of the court, co-operate to the maximum extent possible with foreign courts or foreign representatives.
2. The Trustee is entitled, in the exercise of its functions and subject to the supervision of the court, to communicate directly with foreign courts or foreign representatives.

193. Forms of co-operation

Co-operation referred to in sections 191 and 192 may be implemented by any appropriate means, including:

(a) Appointment of a person or body to act at the direction of the court;

(b) Communication of information by any means considered appropriate by the court;

(c) Co-ordination of the administration and supervision of the debtor’s assets and affairs;

(d) Approval or implementation by courts of agreements concerning the co-ordination of proceedings;

(e) Co-ordination of concurrent proceedings regarding the same debtor.

194. Commencement of a proceeding under this Code after recognition of a foreign main proceeding

After recognition of a foreign main proceeding, a proceeding under this Code may be commenced only if the debtor has assets in India; the effects of that proceeding shall be restricted to the assets of the debtor that are located in India and, to the extent necessary to implement co-operation and co-ordination under sections 191, 192 and 193, to other assets of the debtor that, under the law of India, should be administered in that proceeding.

 

195. Co-ordination of a proceeding under this Code and a foreign proceeding

Where a foreign proceeding and a proceeding under this Code are taking place concurrently regarding the same debtor, the court shall seek co-operation and co-ordination under sections 191, 192 and 193, and the following shall apply:

(a) When the proceeding in India is taking place at the time the application for recognitionof the foreign proceeding is filed,

(i) Any relief granted under section 185 or 187 must be consistent with the proceeding in India; and

(ii) If the foreign proceeding is recognised in India as a foreign main proceeding, section 186 does not apply;

(b) When the proceeding in India commences after recognition, or after the filing of the application for recognition, of the foreign proceeding,

(i) Any relief in effect under section 185 or 187 shall be reviewed by the court and shall be modified or terminated if inconsistent with the proceeding in India; and

(ii) If the foreign proceeding is a foreign main proceeding, the stay and suspension referred to in subsection (1) of section 186 shall be modified or terminated pursuant to subsection (2) of section 186 if inconsistent with the proceeding in India;

(c) In granting, extending or modifying relief granted to a representative of a foreign non-main proceeding, the court must be satisfied that the relief relates to assets that, under the law of India, should be administered in the foreign non-main proceeding or concerns information required in that proceeding.

96. Co-ordination of more than one foreign proceeding

In matters referred to in section 169, in respect of more than one foreign proceeding regarding the same debtor, the court shall seek co-operation and co-ordination under sections 191, 192 and 193, and the following shall apply:

(a) Any relief granted under section 185 or 187 to a representative of a foreign non-main proceeding after recognition of a foreign main proceeding must be consistent with the foreign main proceeding;

(b) If a foreign main proceeding is recognised after recognition, or after the filing of an application for recognition, of a foreign non-main proceeding, any relief in effect under section 185 or 187 shall be reviewed by the court and shall be modified or terminated if inconsistent with the foreign main proceeding;

(c) If, after recognition of a foreign non-main proceeding, another foreign non-main proceeding is recognised, the court shall grant, modify or terminate relief for the purpose of facilitating co-ordination of the proceedings.

197. Presumption of insolvency based on recognition of a foreign main proceeding

In the absence of evidence to the contrary, recognition of a foreign main proceeding is, for the purpose of commencing a proceeding under this Code, proof that the debtor is insolvent.

198. Rule of payment in concurrent proceedings

Without prejudice to secured claims or rights in rem, a creditor who has received part payment in respect of its claim in a proceeding pursuant to a law relating to insolvency in a foreign State may not receive a payment for the same claim in a proceeding under this Code regarding the same debtor, so long as the payment to the other creditors of the same class is proportionately less than the payment the creditor has already received.

Chapter IX
Miscellaneous

199. Rule making power of the Court

1. The Court shall make rules in any or all of the following procedure for:

1. 1. empanelment, appointment and regulation trustees;
   2. procedure for the bankruptcy proceedings;
   3. procedure for the functions of the trustees in matters relating to formulation of scheme, conducting renegotiation, implementation of the scheme, submission of accounts to the court and any other matter incidental thereto;
   4. procedure for winding up, liquidation and dissolution;
   5. procedure for conducting the functions of the trustee for appointments of officials such as public auctioneers, trustees, banks, receiver;
   6. procedure for co-operation and co-ordination with foreign proceedings;
   7. procedure for co-operation and co-ordination with foreign representatives and foreign court; and
   8. procedure for any other matter that the court feels necessary.

2. Regard being had to the generality of the above provision stipulated in subsection (1) the court may make the following further rules for bankruptcy proceedings in banking institutions:

1. 1. manner in which enquiry and proceeding under part III of the Banking Regulation Act and chapter VII of this Code may be held;
   2. the offences which may be tried summarily;
   3. the authority to which, and the conditions subject to which, appeals may be preferred and the manner in which such appeals may be filed and heard; and
   4. any other matter for which provision has to be made for enabling the Court to effectively exercise its functions under thi    s Act.

200. Code to have overriding effect

The provisions of this Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

201. Removal of difficulties

Provided that no order shall be made under this section after the expiry of a period of two years from the commencement of this Code.

1. If any difficulty arises in giving effect to the provisions of this Code, the Union Government may, by order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Code as appear to it to be necessary or expedient for removing the difficulty.
2. Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

202 Power of Registrar to strike defunct company off register (s. 560)

1. Where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation.
2. If the Registrar does not within one months of sending the letter receive any answer thereto, he shall, within fourteen days after the expiry of the month, send to the company by post a registered letter referring to the first letter, and stating that no answer thereto has been received and that, if an answer is not received if the second letter within one months from the date thereof, the notice will be published in the Official Gazette with a view to striking the name of the company off the register.
3. If the Registrar either receives an answer form the company to the effect that it is not carrying on business or in operation, or does not within one months after sending the second letter receive any answer, he may publish in the Official Gazette, and send to the company by registered post, a notice that, at the expiration of three months from the date of that notice, the name of the company mentioned therein will unless cause is shown to the contrary, be struck off the register and the company will be dissolved.
4. If, in any case where a company is being wound up, the Registrar has reasonable cause to believe either that no trustee is acting or that the affairs of the company have been completely wound up, and any returns required to be made by the trustee have not been made for a period of six consecutive months, the Registrar shall publish in the Official Gazette and send to the company or the trustee, if any, a like notice as is provided in sub-section (3).
5. At the expiry of the time mentioned in the notice referred to in sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette; and on the publication in the Official Gazette of this notice, the company shall stand dissolved:

Provided that—

1. the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved; and
2. nothing in this sub-section shall affect the power of the Court to wind up a company the name of which has been struck off the register.

6. If a company, or any member of creditor thereof, feels aggrieved by the company having been struck off the register, the Court, on an application made by the company, member or creditor before the expiry of twenty years from the publication in the Official Gazette of the notice aforesaid, may, if satisfied that the company was, at the time of the striking off, carrying on business or in operation or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register; and the Court may, by the order give such directions and made such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off.
7. Upon a certified coy of the order under sub-section (6) being delivered to the Registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck off.
8. A letter or notice to be sent under this section to a company may be addressed to the company at its registered office, or if no office has been registered, to the care of some director, the managing agent, secretaries and treasurers, manager or other officer of the company, of if there is no director, managing agent, secretaries and treasurers, manager or officer of the company whose name and address are known to the Registrar, may be sent to each of the persons who subscribed the memorandum, addressed to him at the address mentioned in the memorandum.
9. A notice to be sent under this section to a trustee may be addressed to the trustee at his last known place of business.

203 Power of Court to make rules for Banking companies (s. 45 U)

The Court may make rules consistent with this Act and the rules made under Section 52 of the Banking Regulation Act, 1949 prescribing;-

1. 1. the manner in which inquiries and proceedings under Chapter VII may be held;
   2. with regard to the generality of the above provisions as stipulated in subsection (1) in the case of banking companies the court may also make rules as stipulated in section 199.

Website Links/references of Documents referred to in the Report

http://www.uncitral.org/en-index.htm

1. UNCITRAL Model Law on Cross-Border Insolvency :
2. Orderly & Effective Insolvency Procedures:

http://www.imf.org/external/pubs/ft/orderly/index.htm

3. European Convention on Certain International Aspects of Bankruptcy:

http://www.jurisint.org/pub/pres_en.htm

4. Council of the International Bar Association (May 1996) :

`Committee J Cross-Border Insolvency Concordat', Madrid, Spain.