MCA ISSUES ORDER TO REMOVE DIFFICULTIES IN PROCEEDINGS UNDER THE COMPANIES ACT, 1956

posted by: corporate

The Ministry of Corporate Affairs has issued order dated 29th June, 2017 regarding Removal of Difficulties in proceedings under Companies Act, 1956.

Whereas clause (c) of sub-section (1) of section 434 of the Companies Act, 2013 (hereinafter referred to as the 2013 Act) provides that on a date which may be notified by the Central Government for the purpose of transfer of pending proceedings, all proceedings under the Companies Act, 1956 (hereinafter referred to as the 1956 Act) including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer;

And, whereas, the proviso to the said clause (c) provides that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government;

And, whereas, the said clause (c) of sub-section (1) of section 434 of the 2013 Act has come into force from the 15th December, 2016;

And, whereas, in pursuance of the third proviso to the said clause (c), as inserted by S.O. 3676 (E) dated 7th December, 2016, the proceedings relating to winding up of companies which have not been transferred from the High Courts shall be dealt with in accordance with provisions of the 1956 Act and the Companies (Court) Rules, 1959;

And, whereas, in accordance with the said third proviso read with rule 4 of Companies (Transfer of Pending Proceedings)Rules, 2016, all applications and petitions relating to voluntary winding up of companies pending before a High Court as on 1st April, 2017 shall continue with and dealt with by the High Court in accordance with provisions of the 1956 Act;

And, whereas, provisions of section 59 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) which provide for voluntary winding up have been brought into force on 1st April, 2017;

And, whereas, provisions of sections 304 to 323 of the 2013 Act, which sought to replace the corresponding provisions of the 1956 Act, were omitted by the Code;

And, whereas, difficulties have arisen regarding transfer of proceedings relating to those cases of voluntary winding-up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the 1956 Act but the company has not been dissolved before the 1st April, 2017, since the Code provides for a substantially different framework for persons who may be appointed as liquidators and for making of an application for dissolution by the liquidator. While under the 1956 Act, any person could be appointed as a liquidator, only an insolvency professional registered with the Insolvency and Bankruptcy Board of India can be appointed as a liquidator subject to certain conditions. Further, under the 1956 Act, liquidator is required to make a report to the Official Liquidator who, in turn, makes a report to the High Court for dissolution of the company, whereas under the Code, the liquidator is required to make an application for dissolution directly to the Tribunal;

And, whereas, re-appointment of liquidators by companies which had passed resolutions for voluntary winding up under the 1956 Act before 1st April, 2017 and making of report by the Official Liquidators to the High Court (wherein reports have been made by liquidators to the Official Liquidators) would create difficulties;

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 470 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following Order to remove the above said difficulties, namely:-

1. Short title and commencement.- (1) This Order may be called the Companies (Removal of Difficulties) Order, 2017.

(2) It shall come into force with effect from the 29th day of June, 2017.

2. In the Companies Act, 2013, in section 434, in sub-section (1), in clause (c),-

(a) in the third proviso, for “Provided further that-”, the following shall be substituted, namely:-

“Provided also that-”;
(b) after the third proviso, the following proviso shall be inserted, namely:-

“Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies
Act, 1956 and the Companies (Court) Rules, 1959.”.