Winding Up of the Company in India

Meaning of winding up of a company

The winding-up or liquidation is a process where a company’s assets are collected and sold to pay the debts of the company. Any remaining money is distributed in the shareholders of the company after all debts, expenses, and costs have been paid off. The company is formally dissolved after the completion of the winding-up process. The company ceases to exist.

There are two ways for winding up of a company in company law

  1. Where the Court can compulsorily wind up a company.
  2. The creditors or the shareholders of the company can themselves apply for the winding up of the company. This process is known as “Voluntary Winding Up”.

Winding up is the process where the life of a company comes to an end and its property is dissolved for the benefit of its members and creditors. In both the cases of winding up, A Liquidator (Administrator) is appointed. He takes control of the company. He collects the assets and pays the debts of the company and also distributes the remaining money between the shareholders of that company.

Procedure for winding up of a company in India

Section 270, (the Companies Act 2013), gives the procedure for winding up of a company. It provides two ways of winding up by the tribunal voluntary.

Breaking Down ‘Winding Up’

Winding up of a company is a legal process regulated by corporate laws as well as a company’s articles of association or a partnership agreement. It can be compulsory or voluntary and can apply to both publicly and privately held companies.

The procedure of winding up by tribunal

As per Companies Act 2013, the company can be compulsory winding up by tribunal, if:

  1. It is unable to pay its debts.
  2. The company has by special resolution resolved that the company be wound up by the Tribunal.
  3. The company has acted against the interest of the sovereignty and integrity of India, friendly relations with foreign states, and the security of the State, public order, decency or morality.
  4. The Tribunal has ordered the winding up of the company under Chapter XIX.
  5. If the company has not filed financial statements or annual returns for the preceding five consecutive financial years.
  6. If the Tribunal thinks that it is just and equitable that is the company should be wound up.
  7. If the company was formed for fraudulent and unlawful purposes or the affairs of the company have been conducted fraudulently or the persons concerned in the formation or management of its affairs is guilty of fraud or misconduct.

Voluntary winding up of company under companies act 2013

The winding-up of a company can also be done voluntarily by the individuals from the Company, if:

  1. If the company passes a special resolution for winding up of the Company.
  2. The company in general meeting passes a resolution requiring the company to be wound up voluntarily, as a result of the expiry of the period of its duration, if any, fixed by its articles of association or on the event of any occasion in regard of which the articles of association give that the company ought to be broken down.

Procedure for Voluntary Winding-up of A Company

  • Steps 1 – Conduct a board meeting with Directors and pass a resolution with a given declaration of directors that they think that the company has no debt or company will be able to pay its debt after utilizing all the proceeds from the sale of its assets.
  • Step 2 – Issue notices for calling of a General Meeting proposing the resolution along with the explanatory statement.
  • Step 3 – Pass the ordinary resolution of winding up by the 3/4th majority.
  • Step 4 – Conduct a meeting of creditors after passing the resolution, take the consent of majority creditors that winding up of the company is beneficial for all, then the company can be wound up voluntarily.
  • Step 5 – File a notice with the registrar for the appointment of liquidator within 10 days of passing the resolution.
  • Step 6 – Within 14 days, give notice of the resolution in the official gazette and also advertise in a newspaper.
  • Step 7 – File certified copies of an ordinary or special resolution passed in a general meeting within 30 days.
  • Step 8 – Wind up the affairs of the company and prepare the liquidator account.
  • Step 9 – Conduct a General Meeting.
  • Step 10 – Pass a special resolution in that meeting for the disposal of books and all necessary documents of the company, when the affairs of the company are wound up and it is about to dissolve.
  • Step 11 – Submit a copy of accounts and apply to the tribunal within 15 days of the final General Meeting, for passing an order for the dissolution of the company.
  • Step 12 – Within 60 days, if the tribunal thinks that the accounts are in order and all the necessary compliances have been fulfilled, the tribunal shall pass an order for dissolution.
  • Step 13 – The liquidator would then file a copy of the order with the registrar.
  • Step 14 – After receiving the order passed by tribunal, the registrar publishes a notice in the official Gazette declaring that the company is dissolved.

Some recent developments in this area

In 2015, the SC upheld the constitutional validity of the NCALT and NCLT. Therefore, the establishment of these might result in an efficient implementation of the winding-up provisions. It will reduce the multiplicity in the number of cases in multiple forums. NCALT and NCLT will work as specialized quasi-judicial bodies and will reduce the pendency of winding-up cases, avoid multiplicity, shorten the winding-up process, and levels of litigation before high courts, the Board for Industrial, the Company Law Board, and Financial Reconstruction.

Winding up of a company case laws

Dhiren S. Shah, the Liquidator of … vs. ASR Dredging Services Pvt. Ltd. … on 19 November 2018

Mr. Gunjan Kumar Chaubey for Petitioner.

Mr Dakshesh Vyas with Ms Parisha Shah i/b M/s Lex Firmus for Respondent No.1.



  1. This Petition has been filed under section 29A(5)of the Arbitration and Conciliation Act1996 seeking an extension for six months to enable the Arbitral Tribunal to complete the arbitration proceedings and pass its award. This Petition is vehemently opposed by Respondent No.1.
  2. The only contention raised before me by Respondent No.1 is that after the arbitration proceedings were initiated by the Petitioner Company and even after this application for extension of time was recorded, an application under the Insolvency and Bankruptcy Code, 2016 was favoured against the Petitioner by M/s L.
  3. It apparently as per this application favoured by L. & T. Finance Ltd., an order of winding up has been passed against the Petitioner Company. It is in these circumstances that the Respondent No.1 submits that without seeking the permission of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, the arbitration proceedings cannot proceed further. Consequently, no orders can be passed in this Petition also without seeking the permission of the Adjudicating Authority. To support this argument, the learned counsel appearing on behalf of Respondent No.1 relied on section 33(5) of the Code.
  4. I am unable to accept the submission made on behalf of the Respondent No.1 Section 33 falls under Chapter III and manages commencement of liquidation. Section 33(5) stipulates that subject to section 52, when a liquidation order has been passed, no suit or another legal proceeding shall be instituted by or against the corporate debtor. The proviso to section 33(5)further states that a suit or legal proceeding may be instituted by the Liquidator, on behalf of the corporate debtor with the prior approval of the Adjudicating Authority.
  5. This being the situation, I don’t discover any substance in the main conflict raised for the benefit of Respondent No.1. Consequently, the Petition is allowed and the time is extended for six months from today for completing the arbitration proceedings initiated by the Petitioner. However, there shall be no order as to costs.


A company is an artificial legal entity and hence it could not end as a natural person. Winding-up is one of the legal procedures by which the life of the Company can be ended. Winding up can be compulsory or voluntary. Compulsory winding up takes place when a company is forced by the law and by a tribunal, to appoint the liquidator for carrying the control the assets of the Company and adoption of the procedure for the winding up of the Company. The Company is subject to the wind-up of May or not be insolvent. The Company Act, 1956, and Company Act, 2013 are progressively trying to solve the issue of the Winding Up of the Company and to reduce the frauds done by the companies.

Read also:

Breach of Contract under Indian contract act- Types and Remedies

Leave a Comment