Updated: 17 September 2026
Sections 371 and 372 of the Companies Act, 2013: Effect of Registration and Power of Court to Stay or Restrain Proceedings
Sections 371 and 372 form part of Chapter XXI, Part I of the Companies Act, 2013, which deals with companies authorised to register under the Act. Section 371 explains the legal effect of registration under this Part, while Section 372 extends specified protections concerning stays or restraints of legal proceedings to contributories of a company registered under this Part.
Effect of registration under Part I of Chapter XXI.
Power of Court to stay or restrain proceedings in the stated circumstances.
Meaning and Scope of Section 371
Section 371 addresses what follows when an eligible existing entity is registered as a company under Part I of Chapter XXI. In broad terms, the entity's existing constitutional or regulatory provisions are treated as its company conditions and regulations, the Companies Act applies to the registered company and its stakeholders subject to stated exceptions, and specified pre-registration liabilities remain relevant in winding up.
The expression "instrument" is expressly stated in sub-section (7) to include a deed of settlement, deed of partnership, or limited liability partnership.
Meaning and Scope of Section 372
Section 372 concerns the statutory regime for staying or restraining suits and other legal proceedings after presentation of a winding-up petition and before a winding-up order. For a company registered under Part I of Chapter XXI, where the application is made by a creditor, the protection extends to suits and other legal proceedings against a contributory of the company.
Section 371 of Indian Companies Act 2013 "Effect of registration under this Part"
(1) When a company is registered in pursuance of this Part, sub-sections (2) to (7) shall apply.
(2) All provisions contained in any Act of Parliament or any other law for the time being in force, or other instrument constituting or regulating the company, including, in the case of a company registered as a company limited by guarantee, the resolution declaring the amount of the guarantee, shall be deemed to be conditions and regulations of the company, in the same manner and with the same incidents as if so much thereof as would, if the company had been formed under this Act, have been required to be inserted in the memorandum, were contained in a registered memorandum, and the residue thereof were contained in registered articles.
(3) All the provisions of this Act shall apply to the company and the members, contributories and creditors thereof, in the same manner in all respects as if it had been formed under this Act, subject as follows:--
(a) Table F in Schedule I shall not apply unless and except in so far as it is adopted by special resolution;
(b) the provisions of this Act relating to the numbering of shares shall not apply to any company whose shares are not numbered;
(c) in the event of the company being wound up, every person shall be a contributory, in respect of the debts and liabilities of the company contracted before registration, who is liable to pay or contribute to the payment of any debt or liability of the company contracted before registration, or to pay or contribute to the payment of any sum for the adjustment of the rights of the members among themselves in respect of any such debt or liability, or to pay or contribute to the payment of the costs, charges and expenses of winding up the company, so far as relates to such debts or liabilities as aforesaid;
(d) in the event of the company being wound up, every contributory shall be liable to contribute to the assets of the company, in the course of the winding up, all sums due from him in respect of any such liability as aforesaid; and in the event of the death or insolvency of any contributory, the provisions of this Act with respect to the legal representatives of deceased contributories, or with respect to the assignees of insolvent contributories, as the case may be, shall apply.
(4) The provisions of this Act with respect to--
(a) the registration of an unlimited company as a limited company;
(b) the powers of an unlimited company on registration as a limited company, to increase the nominal amount of its share capital and to provide that a portion of its share capital shall not be capable of being called-up except in the event of winding up;
(c) the power of a limited company to determine that a portion of its share capital shall not be capable of being called-up except in the event of winding up, shall apply, notwithstanding anything in any Act of Parliament or any other law for the time being in force, or other instrument constituting or regulating the company.
(5) Nothing in this section shall authorise the company to alter any such provisions contained in any instrument constituting or regulating the company as would, if the company had originally been formed under this Act, have been required to be contained in the memorandum and are not authorised to be altered by this Act.
(6) None of the provisions of this Act (apart from those of section 242) shall derogate from any power of altering its constitution or regulations which may be vested in the company, by virtue of any Act of Parliament or any other law for the time being in force, or other instrument constituting or regulating the company.
(7) In this section, the expression instrument includes deed of settlement, deed of partnership, or limited liability partnership.
Section 372 of Indian Companies Act 2013 "Power of Court to stay or restrain proceedings"
The provisions of this Act 1[or of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be,] with respect to staying and restraining suits and other legal proceedings against a company at any time after the presentation of a petition for winding up and before the making of a winding up order, shall, in the case of a company registered in pursuance of this Part, where the application to stay or restrain is by a creditor, extend to suits and other legal proceedings against any contributory of the company.
1. The words ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016).
How Sections 371 and 372 Fit Within Chapter XXI
These provisions should be read with the surrounding sections. Sections 366 to 370 address eligibility for registration, the certificate of registration, vesting of property, existing liabilities and pending legal proceedings. Sections 373 and 374 then deal with suits stayed on a winding-up order and obligations of companies registering under this Part.
Official Legal Sources
For the current statutory text and amendments, refer to the Companies Act, 2013 published by the Ministry of Corporate Affairs and the India Code portal. Readers dealing with an actual proceeding should also check applicable rules, notifications, amendments and current judicial decisions.