Registration of A Society

Registration of A Society

Minimum 7 or more persons, eligible to enter into a contract can form society for various bona fide purposes. Under the Jammu and Kashmir Act, and Telengana Area Act, only 5 persons can form a society.

Eligibility

Besides individual, following persons are eligible to form a society by subscribing to the memorandum of a society:

• Foreigners
• Partnership firm
• Limited company
• Registered society
• Minors not eligible

Purposes for Which A Society Can be Formed

A society can be formed for the promotion of literature, science or the fine arts or the diffusion of useful knowledge/political education or for charitable purposes. Section 20 of the principal Act specifies the following purposes for which societies may be registered under the Act:

• Grant of charitable assistance
• Creation of Military orphan funds
• Societies established at the General Presidencies of India
• Promotion of
• Science,
• Literature,
• Fine Arts,
• Instructions or diffusion of useful knowledge,
• Diffusion of political education,
• Foundation or maintenance of libraries or reading rooms,
• Public museum and galleries of paintings,
• Works of Act,
• Collections of natural history,
• Mechanical and philosophical inventions,
• Instruments,
• Designs

Formation for Profit Motive Prohibited

For a society registered under Societies Registration Act, 1860 or under the Section 25 of Companies Act, profit motive for personal use is disentitled. Whatever profit is made through the working of such a society, is accountable for, and is necessary to put back the profit in the working of such a society. The Companies Act under section 25 also prohibits any payment of any dividends of its members as part of profit earned.

Registration of Society

Place of registration

The registration of a society is to be done under the act wherever obtaining and not in the state where the benefit is claimed.

Once the persons proposing to form a society have decided upon the name of the society and have prepared a draft of the memorandum and rules and regulations the society the following procedures would have to be adopted for getting the society registered:

Signing of Memorandum of Association

All subscribers (minimum 7) should sign each page of the memorandum and the signature should be witnessed by an Oath Commissioner, Notary Public, Gazetted Officer, Advocate, Chartered Accountant, Magistrate First Class with their rubber/official stamp and complete address.

Documents required to be filed with the registrar of the society

• Covering letter requesting for registration stating in the body of letter various documents annexed to it.

• Memorandum of Association in duplicate along with a certified copy.

• Rules and regulations

• Where there is a reference to any particular existing places of worship like temple, masjid,gurdwara etc. sufficient documentary proof establishing legal competents and control of applicant society over such places should be filed.

• Affidavit of non-judicial stamp paper of appropriate value by President or Secretary of the office.

• Documentary proof house tax receipt, rent receipt in respect premises shown as registered office of a society or ‘No Objection Certificate’ from the owner of the society.

Effect of Registration / Non-Registration of A Society

The Societies Registration Act, 1860 lays down procedure for registration of societies for variousbonafide purposes.

The registration gives the society a legal status and is essential

• for opening bank accounts,
• obtaining registration and approvals under Income Tax Act,
• lawful vesting properties of societies, and
• gives recognition to the society at all forums and before all authorities.

When the society is registered, it and its members become bound to the same extent, as if each member had signed the memorandum.

A society, registered under this Act, must confine its activities to the sphere embraced by its objects.

A tax imposed on a society is one imposed on the society and not on its members.

A society registered under the Act enjoys the status of a legal entity apart from the members constituting it. A society so registered is a legal person just as an individual but with no physical existence. As such it can acquire and hold property and can sue and be sued.

The society should be registered under the Act to acquire the status of juridical person.

In the absence of registration, all the trustees in charge of the fund have alone a legal status and the society has no legal status, and, therefore, it cannot sue and be sued. A non-registered society may exist in fact but not in law. It is immaterial under the Act whether the society is registered but where the benefit is claimed, the registration of society under the Act us required. An unregistered society cannot claim benefits under the Income-tax act.

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Arbitration

Arbitration

The Arbitration and Conciliation Act, 1996 came into force with effect from 22.8.1996. It consolidates and amends the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards.

It applies to the whole of India. It applies to the State of Jammu and Kashmir to the extent of the provisions relating to enforcement of foreign awards, which apply in full, other provisions apply insofar as they relate to international commercial arbitration or conciliation.

The Act is based on the conciliation rules adopted by the United Nations Commission on International Trade (UNCITRAL)

What is arbitration?

Arbitration is a process of dispute resolution in which a neutral third party (called the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. It is the means by which parties to a dispute get the same settled through the intervention of a third person, but without having recourse to court of law.

What is an arbitration agreement?

1. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not.

2. The parties make an agreement that instead of going to the court, they shall refer the dispute to arbitration.

3. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Where an arbitration clause is included in a contract and the contract is avoided due to misrepresentation or fraud, the arbitration clause may still continue to be binding.

4. Where, however, there was no contract at all between the parties or contract was void ab initio, the arbitration clause cannot be enforced.

5. An arbitration agreement/clause must be in writing. Although no formal document is prescribed, however, it must be clear from the document that the parties had agreed to the settlement of dispute through arbitration.

6. Where the arbitration agreement or clause is contained in a document, the parties must sign the document. Besides, the arbitration agreement may be established by-

1. an exchange of letters, telex, telegram or other means of telecommunication; or

2. an exchange of statement.

Appointment of an Arbitrator

Who May be Appointed

A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. In case of an international commercial arbitration, where the parties belong to different nationalities, the Chief Justice of India may appoint an arbitrator of a nationality other than that of the parties.

Number of Arbitrators

The reference may be made either to a single arbitrator or a panel of odd number (i.e. 3, 5,7, etc.) of arbitrators. The parties are free to fix the number of arbitrators by agreement. If there is no agreement, the reference shall be made to a sole arbitrator.

Grounds for Challenging Appointment

The appointment of an arbitrator may be challenged if

1. circumstances exist that give rise to justifiable doubts as to his independence or impartiality or
2. he does not posses the qualifications agreed to by the parties.

Place of Arbitration

The parties are free to agree on the place of arbitration and failing an agreement to do so the place shall be determined by the arbitral tribunal having regard to the circumstances of the case and convenience of the parties.

Who May Refer to Arbitration?

An arbitration agreement is a contract and thus, any party to such an agreement must have the capacity to contract.

What Disputes May be Referred?

The parties to an arbitration agreement may refer to arbitration, a dispute which has arisen or which may arise between them, in respect of a defined legal relationship, whether contracted or not.

Thus, all matters of civil nature whether they relate to present or future disputes may form the subject matter of reference. The dispute, however, must be the consequence of legal relationship arising out of an obligation, the performance of which is a duty under the law and for its breach a remedy is provided.

Bar to Suit

When the parties have entered into an arbitration agreement, they cannot file a suit in a court of law in respect of any matter covered by the agreement; otherwise the very purpose of arbitration will be frustrated. The court will normally not intervene except where so provided by the Act.

What Disputes Cannot be Referred For Arbitration

The following disputes cannot be referred to arbitration:

1. Insolvency proceedings.
2. Lunacy proceedings.
3. Proceedings for appointment of a guardian to a minor.
4. Question of genuineness or otherwise of a will or matter relating to issue of a probate.
5. Matters of criminal nature.
6. Matters concerning Public Charitable Trusts.
7. Disputes arising from and founded on an illegal contract

Interim Orders by Court
A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before its enforcement, apply to the court for any of the following matters-

1. appointment of guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings;
2. preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
3. securing the amount in dispute in the arbitration;
4. detention, preservation or inspection of any property or thing which is the subject matter of the dispute, or to authorize for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for obtaining full information or evidence;
5. interim injunction or the appointment of a receiver; or
6. such other interim measure of protection as may appear to the court to be just and convenient.

A court has jurisdiction to pass interim orders even before arbitral proceedings commence and before an arbitrator is appointed.

Setting aside an Award

An application for setting aside an arbitral award may be made before the court, by a party within three months of receipt of the award by him. The court may set aside an award on the following grounds:

1. a party was under some incapacity;
2. the arbitration agreement is not valid under the law;
3. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
4. the award deals with a dispute not contemplated by or beyond the scope of the submission to arbitration;
5. the composition of the arbitral tribunal or the arbitral proceedings was not in accordance with the agreement or with the law;
6. the subject-matter of the dispute is not capable of settlement by arbitration under the law; or
7. the arbitral award is in conflict with the public policy of India.

Appeal

An appeal shall lie before the court, against the following orders-

1. granting or refusing to grant any interim measure
2. setting aside or refusing to set aside an arbitral award and
3. granting or refusing to grant an interim measure of protection.

No second appeal shall lie against the appellate order of the court, except, however, that an appeal may be made to the Supreme Court.

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Public Interest Litigation and procedures in India

Public Interest Litigation

"Public interest Litigation", in simple words, means, litigation filed in a court of law, for the protection of "Public Interest", such as pollution, Terrorism, Road safety, constructional hazards etc.

Public interest litigation is not defined in any statute or in any act. It has been interpreted by judges to consider the intent of public at large. Although, the main and only focus of such litigation is only "Public Interest" there are various areas where a Public Interest Litigation can be filed. For e.g.

• Violation of basic human rights of the poor
• Content or conduct of government policy
• Compel municipal authorities to perform a public duty.
• Violation of religious rights or other basic fundamental rights.

When can a public interest litigation be filed?

A public interest litigation can be filed only in a case where "Public Interest" at large is effected. Merely because, only one person is effected by state inaction is not a ground for Public interest litigation

These are some of the possible areas where a PUBLIC INTEREST LITIGATION can be filed.

• Where a factory / industrial unit is causing air pollution, and people nearly are getting effected.
• Where, in an area / street there are no street lights, causing inconvenience to commuters
• .Where some "Banquet Hall" plays a loud music, in night causing noise pollution.
• Where some construction company is cutting down trees, causing environmental pollution.
• Where poor people, are affected, because of state government's arbitrary decision to impose heavy "tax".
• For directing the police / Jail authorities to take appropriate decisions in regards to jail reforms, such as segregation of convicts, delay in trial, production of under trial before the court on remand dates.
• For abolishing child labor, and bonded labor.
• Where rights of working women are affected by sexual harassment.
• For keeping a check on corruption and crime involving holders of high political officer.
• For maintaining Roads, Sewer etc in good conditions.
• For removal of Big Hoarding and signboard from the busy road to avoid traffic problem.
• Recently a Public Interest Litigation has been filed, for directing the "Delhi Traffic Police" to stop the method of sending challans to address by post, as it is being misused.

Who Can File a Public Interest Litigation?

• Earlier it was only a person whose interest was directly affected along with others, whereby his fundamental right is affected who used to file such litigation.
• Now, the trend has changed, and, any Public-spirited person can file a case (PUBLIC INTEREST LITIGATION) on behalf of a group of person, whose rights are effected.
• It is not necessary, that person filing a case should have a direct interest in this PUBLIC INTEREST LITIGATION

For e.g. a person in Bombay, can file a PUBLIC INTEREST LITIGATION for, some labor workers being exploited in Madhya Pradesh or as someone filed a PUBLIC INTEREST LITIGATION in supreme court for taking action against Cracker factory in Sivakasi Tamil Nadu, for employing child labor or the case where a standing practicing lawyer filed a PUBLIC INTEREST LITIGATION challenged a government policy to transfer High Court judges and similarly a lawyer filed a PUBLIC INTEREST LITIGATION for release of 80 under trials in a jail, who had spent more number of years in jail, than the period prescribed as punishment for offence, for which they were tried.

It is clear that, any person, can file a PUBLIC INTEREST LITIGATION on behalf of group of affected people. However it will depend on every facts of case, whether it should be allowed or not.

Against Whom a Public Interest Litigation Can be Filed?

• A PUBLIC INTEREST LITIGATION can be filed only against a State / Central Govt., Municipal Authorities, and not any private party.
• However "Private party" can be included in the PUBLIC INTEREST LITIGATION as "Respondent", after making concerned state authority, a party.
  
  For example - If there is a Private factory in Delhi, which is causing pollution, then people living nearly, or any other person can file a PUBLIC INTEREST LITIGATION against:

· Government of Delhi
· State Pollution Control Board, and
· Also against the private factory

• However, a PUBLIC INTEREST LITIGATION can not be filed against the Private party alone concerned state Govt. /, and state authority has to be made a party.

Procedure to File a Public Interest Litigation

A "Public Interest Litigation", is filed in the same manner, as a writ petition is filed.

In High Court

If a Public Interest Litigation is filed in a High court, then two (2) copies of the petition have to be filed. Also, an advance copy of the petition has to be served on the each respondent, i.e. opposite party, and this proof of service has to be affixed on the petition.

In Supreme Court

If a Public Interest Litigation is filed in the Supreme court, then (4)+(1) (i.e. 5) sets of petition has to be filed opposite party is served, the copy only when notice is issued.

Court Fees

A Court fee of RS. 50, per respondent (i.e. for each number of opposite party, court fees of RS. 50)has to be affixed on the petition.

Procedure

• Proceedings, in the PUBLIC INTEREST LITIGATION commence and carry on in the same manner, as other cases.
• However, in between the proceedings if the judge feels he may appoint a commissioner, to inspect allegations like pollution being caused, trees being cut, sewer problems, etc.
• After filing of replies, by opposite party, and rejoinder by the petitioner, final hearing takes place, and the judge gives his final decision.

Can a Letter Explaining Certain Facts to Chief Justice be Treated as A Public Interest Litigation

• In early 90's there have been instances, where judges have treated a post card containing facts, as a PUBLIC INTEREST LITIGATION some of them are :
• Letter alleging the illegal limestone quarrying which devastated the fragile environment in the Himalayan foothills around Mussoorie, was treated as a PUBLIC INTEREST LITIGATION
• A journalist complained to the Supreme Court in a letter, that the national coastline was being sullied by unplanned development which violated the central government directive was treated as a PUBLIC INTEREST LITIGATION

The Present Scenario:

In the past, many people have tried to misuse the privilege of PUBLIC INTEREST LITIGATION and thus now the court generally require a detailed narration of facts and complaint, & then decide whether to issue notice and call the opposite party.

• However as there is no statute laying down rules and regulations for a PUBLIC INTEREST LITIGATION Still the court can treat a letter as a PUBLIC INTEREST LITIGATION
• However the letter should bring the true & clear facts, and if the matter is really an urgent one, the court can treat it is a PUBLIC INTEREST LITIGATION
• But still it depends upon facts and circumstances, and court has the entire discretion.

Reliefs available by Public Interest Litigation

There are many kinds of remedies, which can be given in a PUBLIC INTEREST LITIGATION, to secure the public interest, at large. They are:

Interim Measures

The court can afford an early interim measure to protect the public interest till the final order for example:

• Release of under trial on personal bonds ordering release of all under trial who have been imprisoned for longer time, than the punishment period, free legal aid to the prisoners, imposing an affirmative duty on magistrates to inform under trial prisoners of their right to bail and legal aid. Or
• Closure of Industrial plant emitting poisonous gas, setting up victim compensation scheme, ordering the plaint reopening subject to extensive directions etc. Or
• Prohibiting cutting of trees or making provisions for discharge of sewage, till the disposal of final petition.

Relief in most of the PUBLIC INTEREST LITIGATION cases in the Supreme Court is obtained through interim orders.

Appointing a Committee

• The court may appoint a committee, or commissioner to look into the matter, and submit its report.
• Such committee or commissioner may also be given power to take cognizance of grievances and settle it right in the public intent.

Final Orders

The court may also give final orders by way of direction to comply within a stipulated time.

Can a Writ Petition be Treated as a Public Interest Litigation?

Yes, a writ petition filed by the aggrieved person, whether on behalf of group or together with group can be treated as a PUBLIC INTEREST LITIGATION however,

• The writ petition should involve a question, which affects public at large or group of people, and not a single individual.
• Only the effected /Aggrieved person can file a writ petition.
• There should be a specific prayer, asking the court to direct the state Authorities to take note of the complaint /allegation.

Public Interest Litigation in High Court or Supreme Court

• Both the High court and supreme court have the power to entertain a PUBLIC INTEREST LITIGATION
• Since there are no statutes or rules, there cannot be a specific difference, as to which court will have jurisdiction on the PUBLIC INTEREST LITIGATION
• It will purely and solely depend on the "Nature of the case", if the question involves only a small group of people being effected by action of State authority, the PUBLIC INTEREST LITIGATION can be filed in high court. For e.g. if there is a sewage problem in a locality effecting 50 families, the PUBLIC INTEREST LITIGATION can be filed in High court.
• If a large section of people is effected whether by State Government or Central Government, PUBLIC INTEREST LITIGATION can be filed in Supreme Court For e.g. placing a ban on adult movies, prohibition industrial unit from causing pollution etc.

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Winding up of Company - Why and How?

Winding up of Company

Winding up of a company is the stage , where by the company takes its last breath. It is a process by which business of the company is wound up, and the company ceases to exist anymore. All the assets of the company are sold, and the proceedings collected are used to discharge the liabilities on a priority basis.

Modes of winding up :

There are three ways, in which a company may be wound up. They are :

1. Winding up by the court.

2. Voluntary winding up,
• Members Voluntary winding up.
• Creditors Voluntary winding up.

     c.  Winding up subject to supervision of the court

Winding up by The Court:

A company may be wound up by the court in following situations. Here, the court means "High Court".

1. If the company itself, has passed a special resolution in the general meeting to wound up its affairs. Special resolution means, resolution passed by three-fourth (3/4") of the members present.
2. If there is a default, in holding the statutory meeting or in delivering the statutory report to the Registrar.

A company which is limited by shares, and a company limited by guarantee having share capital, is required to hold a " Statutory meeting" of its members, within six months, and after one month, from the date of commencement of it's business. A statutory report of the meeting so held shall also be forwarded to the registrar. [ sec 165 (1) & (5)]

3. If the company fails to commence it's business within one year from the date of it's incorporation, or suspends it's business for a whole year.

A company limited by shares, has to obtain a "certificate of commencement" of business from the registrar. Unless it obtains such certificate, it cannot carry on it's business operation.

4. If the number of members, in a public company is reduced to less than seven, and in case of private company less than two.

The statutory requirement of minimum number of members in a public company is seven, and in case of private company, it is two (sec 12)

5. If the company is unable to pay its debits; where the financial position of the company is, such, that it has more liabilities than assets, and after disposing off the assets, it is still unable to extinguish it's liabilities, it means that company is unable to pay it's debts.
6. If the court, itself is of the opinion that the company should be wound up.

The court may form such an opinion, if it comes to the knowledge of court that, the company is mismanaged, or financially unsound, or carrying an illegal operations etc.

Relevant Points :

Who Can Apply to Court, For Winding up Petition ? ( Sec 439)

Following persons can apply to the court, for petition for winding up:

• The company itself
• The creditor
• Any Contributory
• Registrar
• Any person authorized by central government, in case of oppression or mismanagement (397)

What Orders, The Court May Pass? (Sec 443)

The court may pass any one of the following orders on hearing the winding up petition.

1. Dismiss it, with or without costs
2. Make any interim order, as it thinks fit, or
3. Pass an order for winding up of the company with or without costs.

Consequences of court passing an order for winding up :

If the court is satisfied, that sufficient reasons exist in the petition for winding up, then it will pass a winding up order. Once the winding up order is passed, following consequences follow

• Court will send notice to an official liquidator, to take change of the company. He shall carry out the process of winding up, ( sec. 444)
• The winding up order, shall be applicable on all the creditors and contributories, whether they have filed the winding up petition or not.
• The official liquidator is appointed by central Government ( sec. 448)
• The company shall relevant particulars, relating to, assets, cash in hand, bank balance, liabilities, particulars of creditors etc, to the official liquidator. ( sec. 454)
• The official liquidator shall within six months, from the date of winding up order, submit a preliminary report to the court regarding:

1.    Particulars of Capital

2.    Cash and negotiable securities

3.    Liabilities

4.    Movable and immovable properties

5.    Unpaid calls, and

6.    An opinion, whether further inquiry is required or not ( 455)

The Central Govt. shall keep a cognizance over the functioning of official liquidator, and may require him to answer any inquiry. (463)

Stay Order :

Where, the court has passed a winding up order, it may stay the proceedings of winding up , on an application filed by official liquidator, or creditor or any contributory. (466)

Dissolution of company (481)

Finally the court will order for dissolution of the company, when :

• the affairs of the company are completely wound up, or
• the official liquidator is unable to carry on the winding up procedure for want of funds.

Appeal : 483

An appeal from the decision of court, will lie before that court, before whom, appeals lie from any order or decision of the former court in cases within it's ordinary jurisdiction.

Voluntary Winding up

A company may , voluntary wind up it's affairs, if it is unable to carry on it's business, or if it was formed only for a limited purpose, or if it is unable to meet it's financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes:

1. Members voluntarily winding up
2. Creditors voluntarily winding up

A company may voluntarily wind up itself, either by passing :

An ordinary resolution, where the purpose for which the company was formed has completed, or the time limit for which the company was formed, has expired.

Or

By way of special resolution

Both types of resolution shall e passed in the general meeting of the company. (484)

Once the resolution of voluntarily winding up is passed, then the company may be wound up, eitherthrough :

• Members voluntarily winding up, or
• Creditors voluntarily winding up

The only difference between the abate two, is that in case of members voluntarily winding up, Board of Directors have to make a declaration to the effect, that company has no debts. (488)

Members Voluntarily Winding up

Directors of the company shall call for a Board of Directors Meeting, and make a declaration of winding up, accompanied by an Affidavit, stating that;

1. The company has no debts to pay, or
2. The company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration (488)

Who shall carry out the winding up procedure? and What shall be the procedure?

• The company shall appoint one or more liquidators, in a general meeting, who shall look after the affair of winding up procedure, and distribution of assets. [ 490 (1)]
• The liquidator so appointed, shall be paid remuneration for his services, which shall also be fixed in general meeting [490 (2)]
• The company shall also give notice of appointment of liquidator to the registrar within ten days of appointment (493)
• Once the company has appointed liquidator, the powers of Board of Directors, Managing Director, and Manager, shall cease to exists. (491)
• The liquidator is generally given a free hand, to carry out the winding up procedure, in such a manner, as he thinks best in the interest of creditors, and company.
• In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, at the end of each year, and he shall present, a complete account of the procedure, and position of liquidator (496)

Members Voluntarily Winding up

Directors of the company shall call for a Board of Directors Meeting, and make a declaration of winding up, accompanied by an Affidavit, stating that;

1. The company has no debts to pay, or
2. The company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration (488)

Who shall carry out the winding up procedure? and What shall be the procedure?

• The company shall appoint one or more liquidators, in a general meeting, who shall look after the affair of winding up procedure, and distribution of assets. [ 490 (1)]
• The liquidator so appointed, shall be paid remuneration for his services, which shall also be fixed in general meeting [490 (2)]
• The company shall also give notice of appointment of liquidator to the registrar within ten days of appointment (493)
• Once the company has appointed liquidator, the powers of Board of Directors, Managing Director, and Manager, shall cease to exists. (491)
• The liquidator is generally given a free hand, to carry out the winding up procedure, in such a manner, as he thinks best in the interest of creditors, and company.
• In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, at the end of each year, and he shall present, a complete account of the procedure, and position of liquidator (496)

Distribution of property of company on voluntarily winding up [ both members and creditors voluntarily winding up]

Once the company is fully wound up, and assets of the company sold or distributed, the proceedings collected are utilized to pay off the liabilities. The proceedings so collected shall be utilized to pay off the creditors in equal proportion . Thereafter any money or property left, may be distributed among members according to their rights and interests in the company.

Winding Up Subject to Supervision of Court

Winding up subject to supervision of court, is different from "Winding up by court."

Here the court only supervise the winding up procedure. Resolution for winding up, is passed by members in the general meeting. It is only for some specific reasons, that court may supervise the winding up proceedings. The court may put up some special terms and conditions also.

However, liberty is granted to creditors, contributories or other to apply to court for some relief. (522)

• The court may also appoint liquidators, in addition to already appointed, or remove any such liquidator. The court may also appoint the official liquidator, as a liquidator to fill up the vacancy.
• Liquidator is entitled to do all such things and acts, as he thinks best in the interest of company. He shall enjoy the same powers, as if the company is being wound-up voluntarily.
• The court also may exercise powers to enforce calls made by the liquidators, and such other powers, as if an order has been made for winding up the company altogether by court. ( 526)

Priority Indisposing Liabilities [529 A & 530]

• When the company is wound up, by any mode, the liabilities shall be discharged in following priority.

1.    Workman's dues.

2.    Debts due to secured creditors, in case of insolvency.

3.    All ---------, taxes, cesses and rates due from the company to the central government or a state govt.

4.    All wages and salary of any employee due within four months.

5.    All -------- holiday remuneration becoming payable to any employee.

• All such debts shall be paid in full. If assets are insufficient to meet them, they shall abate in equal proportions.

Money Received By Liquidator : (553)

Apart from an official liquidator, every liquidator appointed by company or court to carry on the winding up procedure, shall deposit the money is received by him in a scheduled bank, to the credit of a special banking account opened by him.

Winding up ( Contd.)

Apart from a normal company, registered under the companies Act, 1956 there are other companies as well winding up procedure for these companies are bit different from a company registered under companies Act.

Unregistered Companies : (583)

In simple words, an unregistered company, is a company which is not registered or covered under provisions of companies Act. 1956 ( 582)

• An unregistered company, cannot be wound up voluntarily, or, subject to super vision of court.
• However, the circumstances, in which unregistered company may be wound up, are as follows :
1. If the company, is dissolved, or has ceased to carry on business, or is carrying on business only for the purposes of winding up, it's affairs,
2. If the company is unable to pay it's debt
3. If the court is of opinion, that it is just and equitable, that the company, should be wound up.

A creditor, contributory, or company itself by filing a petition, or any person authorized by central government may institute winding up proceedings.

In respect to other aspects, the same provisions and procedure shall follow, as in winding up of registered company.

A foreign company, carrying on business in India, which has been dissolved , may be wound up, as unregistered company.

Foreign Company ( 584)

A foreign company, is a company which is incorporated outside India, and having a place of business in India.

Winding up of such companies is only limited to the extent of it's assets in India. In respect of assets and business carried outside India, Indian courts has no jurisdiction.

• Winding up of a foreign company can only be made through court.
• Even if the company had been dissolved or ceased to exist in the country of it's incorporation, winding up order in this country can be made.
• Even if a foreign company has been wound up according to foreign law, the courts in India still protect the Indian Creditors. The surplus assets, after paying the creditors, should be distributed among the share holders equally in the same proportion, as the assets ---- to the total issued and paid up capital.
• Tendency of a foreign liquidation does not affect the jurisdiction to make winding up order. The Assets can be of any nature and do not take to be in the ownership of the company and can come from any Source [(1944) 2 All.E.R. 556]
• As, for persons claiming to be creditors, their presence, itself is sufficient. It is not required to be shown, that company carried on business operations from any place of business in India.

Government Company

A Govt. company, means a company, in which 51% or more of, shares are held by a govt. company

Winding up procedure for a government company registered under the companies Act, 1956, is nearly similar to normal winding up procedure.

However, courts, take interest of public into consideration, and priority is given to them, as a govt. company is main function is to provide services to public.

Creditors Voluntarily Winding up

1.    Where the resolution for winding up has been passed, but the Board of Directors are not in a position to give a declaration on the liability of company, they may call a meeting of creditors, for the purpose of winding up. (500)

2.    It is the duty of Board of Directors, to present a full statement of company 's affairs, and list of creditors along with their dues, before the meeting of creditors. [500 (3)]

3.     Whatever resolution, the company passes in creditor's meeting, shall be given to the Registrar within ten days of it's passing. (501)

4.     Who shall carry out the winding up procedure and at shall be the procedure ?

5.    Company in the general meeting [ in which resolution for winding up is passed] , and the creditors in their meeting, appoint liquidator. They may either agree on one liquidator, or if two names are suggested, then liquidator appointed by creditor shall act. ( 502)

6.    Any director, member or creditor may approach the court, for direction that ;

·         Liquidator appointed in general meeting shall act, or

·         He shall act jointly with liquidator appointed by creditor, or

·         Appointing official liquidator, or

·         Some other person to be appointed as liquidator. [502 (2)]

7.    The remuneration of liquidator shall be fixed by the creditors, or by the court. (504)

8.    On appointment of liquidator, all the power of Board of Directors shall cease. (505)

9.    In case, the winding up procedure, takes more than one year, then he will have to call a general meeting, and meeting of creditors, at the end of each year, and he shall present, a complete account of the procedure, and the status / position of liquidation (505).

When affairs of the company are fully wound up

The liquidator shall take the following steps, when affairs of the company are fully wound up : (497)

1. Call a general meeting of the members of the company, a lay before it, complete picture of accounts, wining up procedure and how the properties of company are disposed of.
2. The meeting shall be called by advertisement, specifying the time, place and object of the meeting.
3. The liquidator shall send to, the Registrar and official Liquidator copy of account, within one week of the meeting.
4. If from the report, official liquidator comes to the conclusion, that affairs of the company are not being carried in manner prejudicial to the interest of it's members, or public, then the company shall be deemed to be dissolved from the date of report to the court.
5. However, if official liquidator comes to a finding, that affair have been carried in a manner prejudicial to interest of member or public, then court may direct the liquidator to investigate furthers.

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