Insolvency Code amends Companies Act 2013
MCA vide notification no S.O. 3453(E) dated 15th November 2016 has notified section 255 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) w.e.f. 15th November. Pursuant to the said notification, following sections of the Companies Act 2013 stands amended
|1.||Section 2(23)- Definition of ‘Company Liquidator’||Change in definition of ‘Company Liquidator’.
“Company Liquidator” means a person appointed by the Tribunal as the Company Liquidator in accordance with the provision of section 275 for the winding up of a company under this Act.
|2.||Section 2(94A)- Definition of winding up||New insertion in definition relating to ‘winding up’.
“winding up” means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.
|3.||Section 8(9)- Formation of Companies with charitable objects, etc.||For the words ‘the Rehabilitation and Insolvency Fund formed under section 269,’ the words ‘Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016’ have substituted.|
|4.||Section 66(8)- Reduction of share capital||For the words ‘is unable, within the meaning of sub-section (2) of section 271, to pay the amount of his debt or claim,’ the words ‘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,’ have substituted.|
|5.||Section 77(3)- Duty to register charges, etc.||After the words ‘the liquidator,’ the words ‘appointed under this Act or the Insolvency and Bankruptcy Code, 2016, as the case may be,’ have inserted.|
|6.||Section 117(3)(f)- Resolutions and agreements to be filed||For the word and figures ‘section 304,’ the words and figures ‘section 59 of the Insolvency and Bankruptcy Code, 2016’ have substituted.|
|7.||Section 224(2)- Actions to be taken in pursuance of inspector’s report||After the words ‘wound up under this Act’, the words ‘or under the Insolvency and Bankruptcy Code, 2016’ have inserted.|
|8.||Section 230(1)- Power to compromise or make arrangements with creditors and members||After the word ‘liquidator’, the words ‘appointed under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be,’ have inserted.|
|9.||Section 230(6)- Power to compromise or make arrangements with creditors and members||After the word ‘on the liquidator’, the words ‘appointed under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be,’ have inserted.|
|10.||Section 249(1) (e)- Restrictions on making application under section 248 in certain situations||The clause has substituted, namely:-
(e) is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy Code, 2016.
|11.||Section 253- Determination of sickness||Omitted.|
|12.||Section 254- Application for revival and rehabilitation||Omitted.|
|13.||Section 255- Exclusion of certain time in computing period of limitation||Omitted.|
|14.||Section 256- Appointment of interim administrator||Omitted.|
|15.||Section 257- Committee of creditors||Omitted.|
|16.||Section 258- Order of Tribunal||Omitted.|
|17.||Section 259- Appointment of administrator||Omitted.|
|18.||Section 260- Powers and duties of company administrator||Omitted.|
|19.||Section 261- Scheme of revival and rehabilitation||Omitted.|
|20.||Section 262- Sanction of scheme||Omitted.|
|21.||Section 263- Scheme to be binding||Omitted.|
|22.||Section 264- Implementation of scheme||Omitted.|
|23.||Section 265- Winding up of company on report of company administrator||Omitted.|
|24.||Section 266- Power of Tribunal to assess damages against delinquent directors, etc.||Omitted.|
|25.||Section 267- Punishment for certain offences||Omitted.|
|26.||Section 268- Bar of jurisdiction||Omitted.|
|27.||Section 269- Rehabilitation and Insolvency Fund||Omitted.|
|28.||Section 270- Modes of winding up||Sections relating to voluntary winding up have been deleted after enforcement of this Code. So, substitute section 270, namely:-
Winding up by Tribunal
270. The provisions of Part I shall apply to the winding up of a company by the Tribunal under this Act.
|29.||Section 271- Circumstances in which company may be wound up by Tribunal||The section has substituted, namely:-
271. A company may, on a petition under section 272, be wound up by the Tribunal,—
(b) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality;
(c) if on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up;
(d) if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years; or
(e) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up.
|30.||Section 272- Petition for winding up||The section has substituted namely:-
272. (1) Subject to the provisions of this section, a petition to the Tribunal for the winding up of a company shall be presented by—
(b) any contributory or contributories;
(c) all or any of the persons specified in clauses (a) and (b);
(d) the Registrar;
(e) any person authorised by the Central Government in that behalf; or
(f) in a case falling under clause (b) of section 271, by the Central Government or a State Government.
(3) The Registrar shall be entitled to present a petition for winding up under section 271, except on the grounds specified in clause (a) or clause (e) of that sub- section:
Provided that the Registrar shall obtain the previous sanction of the Central Government to the presentation of a petition:
Provided further that the Central Government shall not accord its sanction unless the company has been given a reasonable opportunity of making representations.
(4) A petition presented by the company for winding up before the Tribunal shall be admitted only if accompanied by a statement of affairs in such form and in such manner as may be prescribed.
(5) A copy of the petition made under this section shall also be filed with the Registrar and the Registrar shall, without prejudice to any other provisions, submit his views to the Tribunal within sixty days of receipt of such petition.
|31.||Section 275 (2)- Company Liquidators andtheir appointments||The sub-section has substituted, namely:-
(2) 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.
|32.||Section 275(4)- Company Liquidators andtheir appointments||Omitted.|
|33.||Section 280- Jurisdiction of Tribunal||The section has substituted, namely:-
280. The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of,—
(b) any claim made by or against the company, including claims by or against any of its branches in India;
(c) any application made under section 233;
(d) any question of priorities or any other question whatsoever, whether of law or facts, including those relating to assets, business, actions, rights, entitlements, privileges, benefits, duties, responsibilities, obligations or in any matter arising out of, or in relation to winding up of the company,
|34.||Section 289- Power of Tribunal on application for stay of winding up||Omitted.|
|35.||Section 304- Circumstances in which company may be wound up voluntarily||Omitted.|
|36.||Section 305- Declaration of solvency in case of proposal to wind up voluntarily||Omitted.|
|37.||Section 306- Meeting of creditors||Omitted.|
|38.||Section 307- Publication of resolution to wind up voluntarily||Omitted.|
|39.||Section 308- Commencement of voluntary windingup||Omitted.|
|40.||Section 309- Effect of voluntary winding up||Omitted.|
|41.||Section 310- Appointment of Company Liquidator||Omitted.|
|42.||Section 311- Power to remove and fill vacancy of Company Liquidator||Omitted.|
|43.||Section 312- Notice of appointment of Company Liquidator to be given to Registrar||Omitted.|
|44.||Section 313- Cesser of Board's powers on appointment of Company Liquidator||Omitted.|
|45.||Section 314- Powers and duties of Company Liquidator in voluntary winding up||Omitted.|
|46.||Section 315- Appointment of committees||Omitted.|
|47.||Section 316- Company Liquidator to submit report on progress of winding up||Omitted.|
|48.||Section 317- Report of Company Liquidator to Tribunal for examination of persons||Omitted.|
|49.||Section 318- Final meeting and dissolution of company||Omitted.|
|50.||Section 319- Power of Company Liquidator to accept shares, etc., as consideration for sale of property of company||Omitted.|
|51.||Section 320- Distribution of property of company||Omitted.|
|52.||Section 321- Arrangement when binding on company and creditors||Omitted.|
|53.||Section 322- Power to apply to Tribunal to have questions determined, etc.||Omitted.|
|54.||Section 323- Costs of voluntary winding up||Omitted.|
|55.||Section 325- Application of insolvency rules in winding up of insolvent companies||Omitted.|
|56.||Section 326- Overriding preferential payments||The section has substituted, namely:-
326. (1) In the winding up of a company under this Act, the following debts shall be paid in priority to all other debts:
(b) where a secured creditor has realised a secured asset, so much of the debts due to such secured creditor as could not be realised by him or the amount of the workmen’s portion in his security (if payable under the law), whichever is less, pari passu with the workmen’s dues:
Provided that in case of the winding up of a company, the sums referred to in sub-clauses (i) and (ii) of clause (b) of the Explanation, which are payable for a period of two years preceding the winding up order or such other period as may be prescribed, shall be paid in priority to all other debts (including debts due to secured creditors), within a period of thirty days of sale of assets and shall be subject to such charge over the security of secured creditors as may be prescribed.
Explanation. –For the purposes of this section, and section 327—
(b) “workmen’s dues’’, in relation to a company, means the
aggregate of the following sums due from the company to its
(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, 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.
IllustrationThe value of the security of a secured creditor of a company is Rs. 1,00,000. The total amount of the workmen’s dues is Rs. 1,00,000. The amount of the debts due from the company to its
secured creditors is Rs.3,00,000. The aggregate of the amount of workmen’s dues and the amount of debts due to secured creditors is Rs. 4,00,000. The workmen’s portion of the security
is, therefore, one-fourth of the value of the security, that is Rs. 25,000.
|57.||Section 327(6)- Preferential payments||Change in meaning of relevant date by substituting a clause (c) of the explanation, namely:-
|58.||Section 327(7)- Preferential payments||Insertion of new sub-section (7), namely:-
(7) Sections 326 and 327 shall not be applicable in the event of liquidation under the Insolvency and Bankruptcy Code, 2016.
|59.||Section 329- Transfers not in good faith to be void||Section 329 has substituted namely:-
329. Any transfer of property, movable or immovable, or anydelivery of goods, made by a company, not being a transfer ordelivery made in the ordinary course of its business or in favourof a purchaser or encumbrancer in good faith and for valuableconsideration, if made within a period of one year before thepresentation of a petition for winding up by the Tribunal underthis Act shall be void against the Company Liquidator.
|60.||Section 334- Transfers, etc., after commencement of winding up to be void||Section 334 has substituted namely:-
334. In the case of a winding up by the Tribunal, 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 Tribunal otherwise orders, be void.
|61.||Section 336(1)- Offences by officers of companies in liquidation||In the opening paragraph, for the words ‘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,’ the words ‘by the Tribunal under this Act or which is subsequently ordered to be wound up by the Tribunal under this Act’ have substituted.|
|62.||Section 337- Penalty for frauds by officers||For the words ‘or which subsequently passes a resolution for voluntary winding up,’ the words ‘under this Act,’ have substituted.|
|63.||Section 342 (2), (3) & (4)- Prosecution of delinquent officers and members of company||Omitted.|
|64.||Section 343 (1)- Company Liquidator to exercise certain powers subject to sanction||The sub-section has substituted, namely:-
(1) The Company Liquidator may, with the sanction of the Tribunal, when the company is being wound up by the Tribunal,–
(ii) make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, against the company, or whereby the company may be rendered liable; or
(iii) compromise any call or liability to call, debt, and liability capable of resulting in a debt, and any claim, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or alleged to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the assets or liabilities or the winding up of the company, on such terms as may be agreed, and take any security for the discharge of any such call, debt, liability or claim, and give a complete discharge in respect thereof.
|65.||Section 347(1)- Disposal of books and papers of company||The sub-section has substituted, namely:-
(1) 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.
|66.||Section 348(1)- Information as to pending liquidations||The sub-section has substituted, namely:-
(1) If the winding up of a company is not concluded within one year after its commencement, the Company Liquidator shall, unless he is exempted from so doing, either wholly or in part by the Central Government, within two 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 such form containing such particulars as may be prescribed, duly audited, by a person qualified to act as auditor of the company, with respect to the proceedings in, and position of, the liquidation, with the Tribunal:
Provided that no such audit as is referred to in this sub-section shall be necessary where the provisions of section 294 apply.
|67.||Section 357- Commencement of winding up by Tribunal||The section has substituted, namely:-
357. 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
|68.||Section 370- Continuation of pending legal proceedings||In the proviso, after the words ‘obtained for the winding up the company,’ the words ‘in accordance with the provisions of this Act or of the Insolvency and Bankruptcy Code, 2016’ have inserted.|
|69.||Section 372- Power of Court to stay or restrain proceedings||After the words ‘The provisions of this Act,’ the words ‘or of the Insolvency and Bankruptcy Code,2016, as the case may be,’ have inserted.|
|70.||Section 419(4)- Benches of Tribunal||The sub-section has substituted, namely:-
(4) 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.
|71.||Section 424(1)- Procedure before Tribunal andAppellate Tribunal||After the words, ‘other provisions of this Act’, the words ‘or of the Insolvency and Bankruptcy
Code, 2016’ have inserted.
|72.||Section 424(2)- Procedure before Tribunal and Appellate Tribunal||After the words, ‘under this Act,’ the words ‘or under the Insolvency and Bankruptcy Code, 2016’ have inserted.|
|73.||Section 429(1)- Power to seek assistance of Chief Metropolitan Magistrate, etc.||The sub-section substituted, namely:-
(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,–
(b) cause the same to be entrusted to the Tribunal or other persons authorised by it.
|74.||Section 434- Transfer of certain pending proceedings||The section substituted, namely:-
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:
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; and
(c) all proceedings under the Companies Act, 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.
|75.||Section 468(2)- Powers of Central Government to make rules relating to winding up||The sub-section has substituted, namely:-
(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 holding of meetings of creditors and members in connection with proceedings under section 230;
(iii) for giving effect to the provisions of this Act as to the reduction of the capital;
(iv) generally for all applications to be made to the Tribunal under the provisions of this Act;
(v) the holding and conducting of meetings to ascertain the wishes of creditors and contributories;
(vi) the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets;
(vii) the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator;
(viii) the making of calls; and
(ix) the fixing of a time within which debts and claims shall be proved.
|76.||In Part II, in section III, for clause (b) of schedule V- Remuneration||The clause has substituted , namely:-
(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,
(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.
Amendment to the Schedule II of the Companies Act, 2013
MCA vide Notification No. G.S.R. 1075(E) dated November 17, 2016 has amended the Schedule II of the Companies Act, 2013. By way of amendment, under Part ‘A’, in para 3, in sub-paragraph (ii), for the brackets, letters and words starting with “(ii) For intangible” and ending with the words “force shall apply”, the following brackets, letters and words shall be substituted, namely: -
“For intangible assets, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a company is not required to comply with the Indian Accounting Standards (Ind AS), it shall comply with relevant Accounting Standards under Companies (Accounting Standards) Rules, 2006”
The amendment is applicable for the financial year beginning on or after April 01, 2016.
Special Court notified for the State of Meghalaya
MCA vide Notification No. S.O. 3464(E) dated November 17, 2016 has notified Court of District and Sessions Judge, Shillong , as Special Court for the State of Meghalaya for the purposes of providing speedy trial of offences punishable with imprisonment of two years or more under the Companies Act, 2013, namely:-