Effect of Insolvency & Bankruptcy code on Companies Act, 2013

CS Divesh Goyal 22 Jun 2016 22,117 Views 1 comment Print
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CS Divesh Goyal

AMENDMENT MADE TO CA, 2013 VIDE INSOLVENCY CODE

Legislature Background:

i. Announcement at Budget Speech 2014-15

ii. Viswanathan Committee August 2014

iii. Introduced at Lok Sabha on Dec 21 2015

iv. Referred to Joint Parliamentary Committee

v. Laid down at Rajya Sabha on April 28, 2016

vi. Passed on Lok Sabha on May 05, 2016

vii. Passed by Rajya Sabha on May 11, 2016

viii. Assent of the Horn’ble President on May 28, 2016

ix. Notified on May 28, 2016

Insolvency & Bankruptcy code, 2016 (IBC) received the assent of president on 28/05/2016. The code has become an Act and provisions will be effective from a date to be notified.

As stated in Section 255 read with schedule XI of ‘THE INSOLVENCY AND BANKRUPTCY CODE, 2016’. The Companies Act, 2013 shall be amended in the manner specified in the Eleventh Schedule.

♣ Highlights: Highlights of effect of THE INSOLVENCY AND BANKRUPTCY CODE, 2016 on Companies Act, discussed below in Brief.

Reference of winding up under IBC in CA, 2013 by amending following sections* [2(94A), 224(2), 249(1)(e) & 419]
Definition of company liquidator to also include liquidator under IBC [2(23), 77(3) & 230(1)&(6)]
Voluntary winding up provisions removed from CA, 2013 & put in IBC
List of Section omitted and substituted given below.
Major change: The Company which has made any default cannot make application for voluntary liquidation.
Default under IBC means non-payment of debt when whole or any part of the installment of the amount of debt has become due and payable and is not repaid
Petition for winding up by NCLT cannot be made by a creditor under CA, 2013.
Section 272 of CA, 2013 amended and creditor is removed from the entitlement of making an application to tribunal for the winding up. As, sufficient remedy is given in IBC that they first have right to initiate resolution of insolvency proceedings on failure of which liquidation application may be made.

♣ SICK COMPANIES PROVISIONS REMOVED FROM CA, 2013 & PUT IN IBC*

*Provisions omitted* – 253 to 269
*Provisions amended* – 280

*THE SICK STORY*. _*Sick Companies provisions were themselves sick.*_

Following enactments were brought in:-

1. SICA -1985 read with 1991 &1993 Amendment

2. Companies (Amendment ) Act, 2002_ – Never made effective

3. SICA (Special Provision) Repeal, Act – Not yet effective & now amended by IBC

4. Companies Act, 2013- Never made effective & now omitted by IBC

5. IBC – provisions to be notified

As IBC provides opportunity of resolution & liquidation to both financial & operational creditor on a speedy basis hence Sick Company provisions are omitted.
Further SICA Repeal Act has been amended to facilitate transfer of proceedings from BIFR/AABIFR to NCLT/NCLAT.

The effect of THE INSOLVENCY AND BANKRUPTCY CODE, 2016 on Companies Act,2013 is discussed below:-

Definition:

Sec 2(23): Company Liquidator, Company Liquidator” means a person appointed by the Tribunal as the Company Liquidator in accordance with the provisions of section 275 for the winding up of a company under this Act;

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

Power to Appoint Liquidator

the Tribunal in case of winding up by the Tribunal
the company or creditors in case of voluntary winding up

Power to Appoint Liquidator is only with Tribunal (NCLT)

Sec 2(94A): “Winding Up” means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.”

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
Earlier there was no definition of winding up under CA-2013. Now added by Insolvency code, 2016 as clause 94Aof section 2	New definition added in CA-2013.

Section 8 subsection 9

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

If on the winding up or dissolution of a company registered under this section, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under this section and having similar objects, subject to such conditions as the Tribunal may impose, or may be sold and proceeds thereof credited to the Rehabilitation and Insolvency Fund formed under section 269

If on the winding up or dissolution of a company registered under this section, there remains, after the satisfaction of its debts and liabilities, any asset, they may be transferred to another company registered under this section and having similar objects, subject to such conditions as the Tribunal may impose, or may be sold and proceeds thereof credited to Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016.

Section 66(8)- Reduction of Share Capital

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

Where the name of any creditor entitled to object to the reduction of share capital under this section is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after such reduction, the company is unable, within the meaning of sub-section (2) of section 271, to pay the amount of his debt or claim,—

Where the name of any creditor entitled to object to the reduction of share capital under this section is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after such reduction, the company commits a default, within the meaning of Section 6 of the Insolvency and Bankruptcy Code, 2016, in respect of the amount of his debt or claim.

Section 77(3)– Failure of Registration of Charge:

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator or any other Creditor	Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator appointed under this Act or the Insolvency and Bankruptcy Code, 2016 or any other

Section 117[3(f)]- Resolutions & Agreements required to be filed with ROC:

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
The provisions of this section shall apply to the resolutions requiring a company to be wound up voluntarily passed in pursuance of section 304 ^{(Circumstances in which company may be wound up voluntarily)}	The provisions of this section shall apply to—resolutions requiring a company to be wound up voluntarily passed in pursuance of section 59 of the Insolvency and Bankruptcy Code, 2016^{(VOLUNTARY LIQUIDATION OF CORPORATE PERSONS)}

Section 224(2) – Actions to be taken in pursuance of Inspector’s Report:

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
If any company or other body corporate is liable to be wound up under this Act	If any company or other body corporate is liable to be wound up under this Act or under the Insolvency and Bankruptcy Code, 2016

Section 230 (1) (6)- Power to compromise or make arrangements with creditors and members:

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016
The Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator	The Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator appointed under this Act or under the Insolvency and Bankruptcy Code, 2016
In sub Section 6 Word use as ‘Liquidator’ the word liquidator substitute

Section 249(1)(e)- Restrictions on making the Application under Section 248 in certain Situations:

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
An application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time in the previous three months, the company is being wound up under Chapter XX, whether voluntarily or by the Tribunal	An application under sub-section (2) of section 248 on behalf of a company shall not be made if, at any time in the previous three months, the company is being wound up under Chapter XX, or under the Insolvency and Bankruptcy Code, 2016.”

List of Sections Omitted:

S. No.	Section	Particulars
	Revival and rehabilitation of sick companies
1.	253	Determination of sickness
2.	254	Application for revival and rehabilitation
3.	255	Exclusion of certain time in computing period of limitation
4.	256	Appointment of Interim Administrator
5.	257	Committee of Creditors
6.	258	Order of Tribunal
7.	259	Appointment of administrator
8.	260	Powers and Duties of Company Administrator
9.	261	Scheme of revival and rehabilitation
10.	262	Sanction of scheme
11.	263	Scheme to be binding
12.	264	Implementation of scheme
13.	265	Winding up of company on report of company administrator
14.	275(4)	Provision of removal of name of Liquidator from the Panel
15.	289	Power of Tribunal on application for stay of winding up
	Complete process of Voluntary Winding up
16.	304	Circumstances in which company may be wound up voluntarily
17.	305	Declaration of Solvency in case of proposal to wind up voluntarily
18.	306	Meeting of creditors
19.	307	Publication of Resolution to wind up voluntarily
20.	308	Commencement of voluntary Winding up
21.	309	Effect of Voluntary Winding up
22.	310	Appointment of Company Liquidator
23.	311	Power to remove and fill the vacancy of company liquidator
24.	312	Notice of appointment of company Liquidator to be given to the Registrar
25.	313	Cesser of Board’s Power on appointment of company liquidator
26.	314	Power and duties of Company Liquidator in Voluntary Winding up
27.	315	Appointment of Commitees
28.	316	Company Liquidator to submit the report on progress of winding up
29.	317	Report of Company Liquidator to Tribunal for the Examination of persons
30.	318	Final meeting and dissolution of the company
31.	319	Power of company liquidator to accept the shares etc. as the consideration for the sale of property of the company
32.	320	Distribution of the property of the company
33.	321	Arrangement when binding on Company and liquidator
34.	322	Power to apply to Tribunal to have questions determined Cost of Voluntary Winding Up
35.	323	Cost of Volunary winding Up
36.	325	Application of insolvency rules in winding up of insolvent Companies.
37.	The heading “Part II.—Voluntary winding up” shall be omitted
38.	342(2)(3)(4)	Prosecution of delinquent officers and members of Company.

List of Sections Language of which is substituted:

S. No.	Section	Heading
1.	270	Modes of winding Up
2.	271	Circumstances in which company may be wound up by Tribunal
3.	272	Petition for winding up
4.	275(2)	Who can appoint as Liquidator or Company Liquidator
5.	329	Transfers not in good faith to be void
6.	334	Transfers, etc., after commencement of winding up to be void
7.	343(1)	Company Liquidator to exercise certain powers subject to sanction
8.	347(1)	Disposal of books and papers of company
9.	348(1)	Information as to pending liqui
10.	357
11.	370(proviso)
12.	419(4)
13.	429(1)
14.	434
15.	468(2)
16.

Section 270: Modes of Winding up:-

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

(1) The winding up of a company may be either—

(a) by the Tribunal; or

(b) Voluntary.

(2) Notwithstanding anything contained in any other Act, the provisions of this Act with respect to winding up shall apply to the winding up of a company in any of the modes specified under sub-section (1).

The provisions of Part I shall apply to the winding up of a Company by the Tribunal under this Act.

Section 271: Circumstances in which company may be wound up by Tribunal:-

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

A company may, on a petition under section 272, be wound up by the Tribunal. Here Situation given a,b,c,d,e,f,g

A company may, on a petition under section 272, be wound up by the Tribunal.

Here Situation given a,b,c,d,e,f,g

Effect:

This Section has been completely substituted by the Insolvency and Bankruptcy Code, 2016. In earlier section there were 7 situations in which petition to be filed with tribunal for winding up of the Company but in new section substituted by I&B Code 2016 only 5 situations are there.

Following two situations are deleted:

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

(d) if the Tribunal has ordered the winding up of the company under [1]Chapter XIX;

Note:

If a Company is unable to pay its debts, creditors can’t file petition in tribunal in this circumstance for winding up of the Company.

Section 272: Petition for winding up:-

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
A petition to the Tribunal for the winding up of a company shall be presented by. Here Situation given a,b,c,d,e,f,g	A petition to the Tribunal for the winding up of a company shall be presented by. Here Situation given a,b,c,d,e,f,g

Effect:

Following situations are deleted:

(b) any creditor or creditors, including any contingent or prospective creditor or creditors;

Note:

If a Company is unable to pay its debts, creditors can’t file petition in tribunal in this circumstance for winding up of the Company. Section 272 amended and creditor removed from the entitlement of making application for winding up to tribunal. As, sufficient remedy is given in IBC that they first have right to initiate resolution of insolvency proceeding on failure of which liquidation application may be made.

275. Company Liquidators and their appointments

(a) for sub-section (2) of section 275, the following sub-section shall be substituted, namely:—

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

The provisional liquidator or the Company Liquidator, as the case may be, shall be appointed from a panel maintained by the Central Government consisting of the names of chartered accountants, advocates, company secretaries, cost accountants or firms or bodies corporate having such chartered accountants, advocates, company secretaries, cost accountants and such other professionals as may be notified by the Central Government or from a firm or a body corporate of persons having a combination of such professionals as may be prescribed and having at least ten years’ experience in company matters.

The provisional liquidator or the Company Liquidator, as the case may, shall be appointed by the Tribunal from amongst the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016;”

Effect:

Only the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016 can be appointed as liquidator or official liquidator by the Company.

b) sub-section (4) shall be omitted.

336. Offences by officers of companies in liquidation.

In section 336, in sub-section (1) , in the opening paragraph, following word substituted

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
If any person, who is or has been an officer of a company which, at the time of the commission of the alleged offence, is being wound up, whether by the Tribunal or voluntarily, or which is subsequently ordered to be wound up by the Tribunal or which subsequently passes a resolution for voluntary winding up,—	If any person, who is or has been an officer of a company which, at the time of the commission of the alleged offence, is being wound up, the Tribunal under this Act or which is subsequently ordered to be wound up by the Tribunal under this Act,—

Effect: Provisions of Voluntary winding up removed from this section.

337. Penalty for frauds by officers.

In section 337, in the opening paragraph, following word substituted

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

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 Tribunal or which subsequently passes a resolution for voluntary winding up

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 Tribunal under this Act.

280. Jurisdiction of Tribunal.

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,—.

Here Situation given a,b,c,d,e,

The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,—.

Here Situation given a,b,c,d,e,

Effect:

This Section has been completely substituted by the Insolvency and Bankruptcy Code, 2016. In earlier section there were 5 situations in which tribunal have jurisdiction to entertain, or dispose of but in new section substituted by I&B Code 2016 only 4 situations are there.

Following situations are deleted:

any scheme submitted under section 262 (Scheme of revival and rehabilitation);

Overriding preferential payments.

Adding of Explanation in the Section.

Effect:

This section states the situation of payment on priority in case of winding up of the Company. This section is completely substitute by new Section in IBC.

Major change an explanation added in the Section. Now Workmen/Workmen dues describe in explanation:

(a) “workmen”, in relation to a company, means the employees of the company, being workmen within the meaning of clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947);

(b) “workmen’s dues”, in relation to a company, means the aggregate of the following sums due from the company to its workmen, namely:—

(i) all wages or salary including wages payable for time or piece work and salary earned wholly or in part by way of commission of any workman in respect of services rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947 (14 of 1947);

(ii) all accrued holiday remuneration becoming payable to any workman 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;

(iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or 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 (19 of 1923), rights capable of being transferred to and vested in the workmen, all amount due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company;

(iv) all sums due to any workman from the provident fund, the pension fund, the gratuity fund or any other fund for the welfare of the workmen, maintained by the company;

c) “workmen’s portion”, in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen’s dues bears to the aggregate of the amount of workmen’s dues and the amount of the debts due to the secured creditors.

327 Preferential payments.

a) after sub-section (6), the following sub-section shall be inserted, namely:—

” (7) Sections 326 and 327 shall not be applicable in the event of liquidation under the Insolvency and Bankruptcy Code, 2016.”;

b) in the Explanation, for clause (c), the following clause shall be substituted, namely:—‘

“(c) the expression “relevant date” means in the case of a company being wound up by the Tribunal, the date of appointment or first appointment of a provisional liquidator, 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 under the Insolvency and Bankruptcy Code, 2016;”.

327. Company Liquidator to exercise certain powers subject to sanction.

b) Section 343(1) Completely Substituted.

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

(1) The Company Liquidator may—

(a) with the sanction of the Tribunal, when the company is being wound up by the Tribunal; and

(b) with the sanction of a special resolution of the company and prior approval of the Tribunal, in the case of a voluntary winding up,—

(1) The Company Liquidator may, with the sanction of the Tribunal, when the company is being wound up by the Tribunal; and

Effect:

Now Company Liquidator can’t exercise power by sanction of a Special Resolution.

347. Disposal of books and papers of company.

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

When the affairs of a company have been completely wound up and it is about to be dissolved, its books and papers and those of the Company Liquidator may be disposed of as follows:—

(a) in the case of winding up by the Tribunal, in such manner as the Tribunal directs; and

(b) in the case of voluntary winding up, in such manner as the company by special resolution with the prior approval of the creditors direct.

When the affairs of a company have been completely wound up and it is about to be dissolved, the books and papers of such company and those of the Company Liquidator may be disposed of in such manner as the Tribunal directs.

Effect: Provisions of Voluntary winding up removed from this section.

357. Commencement of winding up by Tribunal

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

(1) Where, before the presentation of a petition for the winding up of a company by

the Tribunal, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Tribunal, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.

(2) In any other case, the winding up of a company by the Tribunal shall be deemed to commence at the time of the presentation of the petition for the winding up.

The winding up of a company by the Tribunal under this Act shall be deemed to commence at the time of the presentation of the petition for the winding up.”

Effect: Provisions of Voluntary winding up removed from this section.

370 , 372 and 424:

In all three sections wherever the word ‘The provisions of this Act’, is used add “and of the Insolvency and Bankruptcy Code, 2016, as the case may be,” after that word.

419 Benches of Tribunal.

Section 419(4) Completely Substituted:—

Companies Act, 2013	The Insolvency And Bankruptcy Code, 2016’
The President shall, for the disposal of any case relating to rehabilitation, restructuring, reviving [omitted]34, of companies, constitute one or more Special Benches consisting of three or more Members, majority necessarily being of Judicial Members	The Central Government shall, by notification, establish such number of benches of the Tribunal, as it may consider necessary, to exercise the jurisdiction, powers and authority of the Adjudicating Authority conferred on such Tribunal by or under Part II of the Insolvency and Bankruptcy Code, 2016

429 Power to seek assistance of Chief Metropolitan Magistrate, etc.

Section 429(4) Completely Substituted:—

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

429. (1) The Tribunal may, in any proceeding relating to a sick company or winding up of any other company, in order to take into custody or under its control all property, books of account or other documents, request, in writing, the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector within whose jurisdiction any such property, books of account or other documents of such sick or other company, are situate or found, to take possession thereof, and the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector, as the case may be, shall, on such request being made to him,—

(a) take possession of such property, books of account or other documents; and

(b) cause the same to be entrusted to the Tribunal or other person authorised by it.

“(1) The Tribunal may, in any proceedings for winding up of a company under this Act or in any proceedings under the Insolvency and Bankruptcy Code, 2016, in order to take into custody or under its control all property, books of account or other documents, request, in writing, the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector within whose jurisdiction any such property, books of account or other documents of such company under this Act or of corporate persons under the said Code, are situated or found, to take possession thereof, and the Chief Metropolitan Magistrate, Chief Judicial Magistrate or the District Collector, as the case may be, shall, on such request being made to him,—

(a) take possession of such property, books of account or other documents; and

(b) cause the same to be entrusted to the Tribunal or other persons authorized by it.”.

Effect ‘The Tribunal may, in any proceeding relating to a sick company or winding up of any other company’ substituted with ‘The Tribunal may, in any proceedings for winding up of a company under this Act or in any proceedings under the Insolvency and Bankruptcy Code, 2016’.

429. Transfer of certain pending proceedings.

Section 434 Completely Substituted:—

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

(1) On such date as may be notified by the Central Government in this behalf,—

(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;

(b) any person aggrieved by any decision or order of the Company Law Board made

before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order:

Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days;

(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings mrelating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer.

(d) any appeal preferred to the Appellate Authority for Industrial and Financial Reconstruction or any reference made or inquiry pending to or before the Board of Industrial and Financial Reconstruction or any proceeding of whatever nature pending before the Appellate Authority for Industrial and Financial Reconstruction or the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) immediately before the commencement of this Act shall stand abated:

Provided that a company in respect of which such appeal or reference or inquiry stands abated under this clause may make a reference to the Tribunal under this Act within one hundred and eighty days from the commencement of this Act in accordance with the provisions of this Act:

Provided further that no fees shall be payable for making such reference under this Act by a company whose appeal or reference or inquiry stands abated under this clause.

(2) The Central Government may make rules consistent with the provisions of this Act to ensure timely transfer of all matters, proceedings or cases pending before the Company Law Board or the courts, to the Tribunal under this section.

434. (1) On such date as may be notified by the Central Government in this behalf,—

(b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order:

(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer:

Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government.

Effect: Following matter will not transfer to tribunal.

Any appeal preferred to the Appellate Authority for Industrial and Financial Reconstruction or any reference made or inquiry pending to or before the Board of Industrial and Financial Reconstruction or any proceeding of whatever nature pending before the Appellate Authority for Industrial and Financial Reconstruction or the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985

468. Powers of Central Government to make rules relating to winding up

In section 468, sub-section (2), shall be substituted.

The Central Government shall, make rules consistent with the Code of Civil Procedure, 1908 (5 of 1908) providing for all matters relating to the winding up of companies, which by this Act, are to be prescribed, and may make rules providing for all such matters, as may be prescribed.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:— (ii) for the voluntary winding up of companies, whether by members or by creditors; This point two has been removed from new section.

Effect: power of CG to make rules relating to voluntary winding up of Companies removed from this section.

In Schedule V, in Part II, in section III, for clause (b), the following clause shall be substituted, namely:—

Companies Act, 2013

The Insolvency And Bankruptcy Code, 2016’

(b) where the company—

(i) is a newly incorporated company, for a period of seven years from the date of its incorporation, or

(ii) is a sick company, for whom a scheme of revival or rehabilitation has been ordered by the Board for Industrial and Financial Reconstruction or National Company Law Tribunal, for a period of five years from the date of sanction of scheme of revival, it may pay remuneration up to two times the amount permissible under Section II.

“(b) where the company—

(i) is a newly incorporated company, for a period of seven years from the date of its incorporation, or

(ii) is a sick company, for whom a scheme of revival or rehabilitation has been ordered by the Board for Industrial and Financial Reconstruction for a period of five years from the date of sanction of scheme of revival, or

(iii) is a company in relation to which a resolution plan has been approved by the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 for a period of five years from the date of such approval,

it may pay remuneration up to two times the amount permissible under section II.”.

Effect: One new situation added:

If a Company for which a resolution plan has been approved by the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 may pay remuneration up to two times the amount permissible under section II for a period of five years from the date of such approval.

[1] CHAPTER XIX REVIVAL AND REHABILITATION OF SICK COMPANIES

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

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Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written consent of the author.

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Author Bio

Name: CS Divesh Goyal

Qualification: CS

Company: Goyal Divesh & Associates

Location: Delhi, New Delhi, IN

Member Since: 04 Jun 2017 | Total Posts: 610

CS Divesh Goyal is Fellow Member of the Institute of Companies Secretaries and Practicing Company Secretary in Delhi and Steering Voice in the Corporate World. He is a competent professional having enrich post qualification experience of a decade with expertise in Corporate Law, FEMA, IBC, SEBI, View Full Profile