Sections 274 and 275 of the Companies Act, 2013: Statement of Affairs and Company Liquidators

Section 274 - Directions for filing statement of affairs

Meaning: Section 274 applies where a winding-up petition is filed before the Tribunal by a person other than the company. If the Tribunal is satisfied that a prima facie case for winding up has been made out, it directs the company to file its objections together with a statement of its affairs.

Time allowed for objections and statement of affairs

Consequence of failure to file

Under Section 274(2), a company that fails to file the statement of affairs referred to in Section 274(1) forfeits its right to oppose the winding-up petition. Directors and officers found responsible for the non-compliance are exposed to the punishment specified in Section 274(4).

Books of account after a winding-up order

Where the Tribunal makes a winding-up order under Section 273(1)(d), Section 274(3) requires the directors and other officers to submit the company's books of account, completed and audited up to the date of the order, to the liquidator within 30 days and at the company's cost, in the manner specified by the Tribunal.

Punishment under Section 274(4)

A director or officer in default who contravenes Section 274 may be punished with imprisonment for a term extending to six months, or with a fine of not less than ₹25,000 and up to ₹5,00,000, or with both. Under Section 274(5), a complaint may be filed before the Special Court by the Registrar, provisional liquidator, Company Liquidator, or a person authorised by the Tribunal.

Section 275 - Company Liquidators and their appointments

Meaning: Section 275 deals with the appointment of the person who conducts the winding up of a company under the supervision of the Tribunal.

Appointment at the time of winding-up order

Under Section 275(1), when the Tribunal passes an order for winding up, it appoints an Official Liquidator or a liquidator in accordance with the statutory framework as the Company Liquidator.

Insolvency professional requirement

Section 275(2), as substituted through the Insolvency and Bankruptcy Code, 2016, provides that the provisional liquidator or Company Liquidator is to be appointed by the Tribunal from among insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016. The Insolvency and Bankruptcy Board of India regulates insolvency professionals under that Code.

Powers of a provisional liquidator

Under Section 275(3), the Tribunal may limit or restrict the powers of a provisional liquidator in the appointment order or by a later order. Subject to such restriction, the provisional liquidator has the same powers as a liquidator.

Section 275(4) omitted

Sub-section (4) was omitted by Section 255 and the Eleventh Schedule to the Insolvency and Bankruptcy Code, 2016 with effect from 15 November 2016.

Terms, fee and declaration of independence

Under Section 275(5), the Tribunal specifies the terms and conditions of appointment and the fee payable, taking into account the task to be performed, experience and qualification of the liquidator, and the size of the company.

Section 275(6) requires a provisional liquidator or Company Liquidator, within seven days of appointment, to file the prescribed declaration disclosing any conflict of interest or lack of independence. The obligation to remain independent continues throughout the appointment.

Provisional liquidator may continue as Company Liquidator

Section 275(7) permits the Tribunal, while passing the winding-up order, to appoint a provisional liquidator previously appointed under Section 273(1)(c) as the Company Liquidator for conduct of the winding-up proceedings.