Changes in Winding Up Procedure in IBC Code 2016

  • Blog|Insolvency and Bankruptcy Code|
  • 3 Min Read
  • By Taxmann
  • |
  • Last Updated on 27 December, 2022

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Insolvency and Bankruptcy Code, 2016 basically consolidates the insolvency laws for various entities under a single legislation. It is equally applicable to companies, partnership firms, and limited liability partnership firms. What Insolvency and Bankruptcy Code, 2016 have empowered to creditors is the time-bound resolution to their insolvency process rather than must dwell for years to get their money back from a company going on a bad debt. This Code empowers creditors and thus gives them the freedom to lend money to Indian entrepreneurs with ease.

IBC Code 2016 or Insolvency and Bankruptcy Code 2016 must amend ended various laws of Winding up of a company under Companies Act, 2013. As per IBC Code 2016, the definition of winding up was formatted to be winding up or liquidation under the Insolvency and Bankruptcy Code 2016. All the laws in section 270 of Winding up of a company under Companies Act, 2013 which relates to Modes of winding up were deleted and substituted by Winding up by Tribunal.

A circumstance under which a company could be wound up by the Tribunal are as follows –

• If a special resolution has been passed by the Tribunal for winding up of the company. • If it is found that company has acted against the sovereignty, integrity, and security of India’s friendly relations with foreign states. • If Tribunal has found that company have enacted fraudulently or in an unlawful manner.   • If the concerned people of the company especially management are found to be guilty of fraud or misconduct. • If the company is found to be a defaulter in filing its financial statements for preceding financial years with Company Registrar. •In the case for any reason, Tribunal thinks that a company should be wound up. • The Section 275 of Winding up of a company under the Companies Act, 2013 for the appointment of Company Liquidators have been replaced by Insolvency Professionals, who are appointed and governed by the Tribunal as per Insolvent and Bankruptcy Code 2016. • The section 304 for Voluntary Winding Up of the companies under Winding up of a company under the Companies Act, 2013 have been totally omitted in Insolvency and Bankruptcy Code 2016.

As per the resolution passed on 7th Dec 2016, the pending cases were passed on to NCLT as per below criteria –

• If the Winding-up was happening under the supervision of the court, then it would be retained by the High Court. • All voluntary winding up cases filed up to 31st March 2017 would be retained by the High Court and for all new cases from 1st April 2017, NCLT would be taking charge. • When a company needs to get wind up for inability to pay, and the petition is served then High Court will take care of it. In case of a petition, have not yet been served then it would fall under IBC 2016. • When winding up must be done by Court, then is the petition is served on Respondent, then High Court will take care of it. However, if the petition has never been served on Respondent, then it would fall under Insolvency and Bankruptcy Code, 2016. Voluntary winding up of private limited company procedure was made part of Insolvency and Bankruptcy Code, 2016 in Chapter 5 of Part II. As per Section 59 of IBC Code 2016, a person from corporate who has not committed any default could initiate a voluntary winding up.
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