Sections 297, 298 and 299 of the Companies Act, 2013
Adjustment of rights of contributories, power to order costs, and power of the Tribunal to summon persons suspected of having company property, books, papers or information.
Section 297 - Adjustment of rights of contributories
Section 297 addresses the final adjustment of rights between contributories in a winding up. In practical terms, after the company's liabilities and winding-up requirements are dealt with, the Tribunal determines the relative rights of contributories and the persons entitled to any remaining surplus.
Statutory provision: The Tribunal shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled thereto.
Section 298 - Power to order costs
Section 298 applies where the company's assets are insufficient to satisfy its liabilities. It authorises the Tribunal to determine the order of priority, as between the relevant winding-up costs, charges and expenses, for payment out of the available assets.
Statutory provision: The Tribunal may, in the event of the assets of a company being insufficient to satisfy its liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up, in such order of priority inter se as the Tribunal thinks just and proper.
Section 299 - Power to summon persons suspected of having property of company, etc.
Section 299 gives the Tribunal powers to obtain information, documents, property and payment relevant to the winding up. The power becomes available after appointment of a provisional liquidator or after a winding-up order has been passed.
Sub-section (1): Persons who may be summoned
The Tribunal may summon an officer of the company; a person known or suspected to possess company property, books or papers; a person known or suspected to owe money to the company; or a person whom the Tribunal considers capable of giving information about the promotion, formation, trade, dealings, property, books, papers or affairs of the company.
Sub-section (2): Examination on oath
The Tribunal may examine a summoned officer or person on oath, orally, through written interrogatories or by affidavit. Where the examination is oral, answers may be reduced to writing and the person may be required to sign them.
Sub-section (3): Production of books and papers
The Tribunal may require production of company-related books and papers in the custody or power of the summoned person. A claimed lien is preserved by the act of production, and the Tribunal may determine questions relating to that lien.
Sub-section (4): Liquidator's report
The Tribunal may direct the liquidator to file a report concerning company debt or property in the possession of other persons.
Sub-section (5): Orders for debt or property
If the Tribunal finds that a person is indebted to the company, it may order payment to the provisional liquidator or liquidator on terms it considers just. If a person possesses company property, the Tribunal may order delivery of that property, or part of it, to the provisional liquidator or liquidator.
Sub-section (6): Failure to appear
If a summoned officer or person fails to appear at the appointed time without reasonable cause, the Tribunal may impose an appropriate cost.
Sub-section (7): Execution
An order under sub-section (5) is executable in the same manner as a decree for payment of money or delivery of property under the Code of Civil Procedure, 1908.
Sub-section (8): Discharge after payment or delivery
A person making payment or delivery pursuant to an order under sub-section (5) is, unless the order otherwise directs, discharged from liability in respect of that debt or property.
Meaning of important terms
Tribunal: In the Companies Act context, references to the Tribunal generally mean the National Company Law Tribunal (NCLT), subject to the statutory definition and the matter in question.
Contributory: Broadly, a contributory is a person liable to contribute to the assets of a company in the event of its being wound up, and the expression is used in the winding-up framework of the Act.
Company Liquidator: The liquidator appointed in accordance with the Companies Act to conduct the winding-up process and perform the statutory functions assigned to that office.
Inter se: A legal expression meaning "among themselves" or "between the persons concerned." In Section 298, it refers to the priority among the winding-up costs, charges and expenses.
How Sections 297, 298 and 299 work together
The provisions address different stages and needs of a Tribunal-supervised winding up. Section 299 assists in identifying and recovering company property, debts, documents and information. Section 298 enables the Tribunal to determine the priority of winding-up costs where available assets are inadequate. Section 297 addresses adjustment of contributories' rights and distribution of any surplus among persons entitled to it.
Note: The application of these provisions depends on the facts of the winding-up proceeding and orders of the Tribunal. For filing requirements, procedural rules and current notifications, the latest official material should also be checked.
Official legal resources
For the current statutory text and regulatory material, see the Ministry of Corporate Affairs and the Companies Act, 2013 on India Code.