Sections 257 and 258 of Companies Act 2013: Committee of Creditors and Order of Tribunal
Sections 257 and 258 of the Companies Act, 2013 originally formed part of Chapter XIX dealing with revival and rehabilitation of sick companies. Both provisions have been omitted and are no longer operative provisions of the Companies Act, 2013.
What were Sections 257 and 258 of the Companies Act, 2013?
Section 257 was titled "Committee of creditors", while Section 258 was titled "Order of Tribunal". They were contained in Chapter XIX of the Companies Act, 2013, which originally dealt with the revival and rehabilitation of sick companies.
The insolvency law framework was subsequently substantially reorganised after enactment of the Insolvency and Bankruptcy Code, 2016. As part of that restructuring, Sections 253 to 269 of the Companies Act, 2013 were omitted.
| Provision | Original subject | Present status |
|---|---|---|
| Section 257 | Committee of creditors | Omitted with effect from 15 November 2016 |
| Section 258 | Order of Tribunal | Omitted with effect from 15 November 2016 |
Section 257 - Committee of Creditors
Section 257 of the Companies Act, 2013 was originally associated with the constitution of a committee of creditors within the statutory framework for revival and rehabilitation of sick companies.
However, Section 257 no longer operates as a provision of the Companies Act, 2013. It was omitted by the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016.
Section 258 - Order of Tribunal
Section 258 of the Companies Act, 2013 was titled "Order of Tribunal" and formed part of the former statutory scheme relating to revival and rehabilitation of sick companies.
This section was also omitted by Section 255 read with the Eleventh Schedule to the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016. Accordingly, Section 258 should not be treated as a currently operative source of powers of the Tribunal.
Why were Sections 257 and 258 omitted?
The Insolvency and Bankruptcy Code, 2016 introduced a consolidated statutory framework for insolvency resolution and liquidation. The Eleventh Schedule to the Code consequently amended the Companies Act, 2013 and omitted Sections 253 to 269, which comprised the former Chapter XIX provisions on revival and rehabilitation of sick companies.
Section 255 of the Insolvency and Bankruptcy Code, 2016 provides for amendments to the Companies Act, 2013 in the manner specified in the Eleventh Schedule.
Where is the Committee of Creditors governed now?
For corporate insolvency resolution proceedings under the Insolvency and Bankruptcy Code, 2016, the Committee of Creditors is principally governed by the provisions of the IBC, including Section 21, read with the applicable Insolvency and Bankruptcy Board of India regulations.
The Committee of Creditors plays a central role in the corporate insolvency resolution process. Its constitution, voting rights, meetings and decision-making are governed by the current IBC framework and the regulations made under it.
Which Tribunal deals with corporate insolvency matters?
Under the current insolvency framework, the National Company Law Tribunal is the Adjudicating Authority for insolvency resolution and liquidation of corporate persons in accordance with Section 60 of the Insolvency and Bankruptcy Code, 2016, subject to the provisions of the Code.
This should be distinguished from the former Section 258 of the Companies Act, 2013. Section 258 itself has been omitted and does not constitute the current statutory basis for orders in corporate insolvency proceedings.
Legal position at a glance
Sections 257 and 258 remain relevant primarily for understanding the legislative history of the Companies Act, 2013. They should not be cited as presently operative provisions governing a Committee of Creditors or orders of the Tribunal.
For current corporate insolvency matters, reference should instead be made to the Insolvency and Bankruptcy Code, 2016, the rules made under the Code, and the regulations and amendments issued by the Insolvency and Bankruptcy Board of India.