Grounds for Winding Up by Tribunal: Section 271

The grounds for winding up by tribunal are set out in one section of the Companies Act, 2013. Section 271 lists five, lettered (a) to (e), and a petition under section 272 has to land on one of them. Four of the five name conduct. The fifth names none. This page reads the section as printed in the consolidated Act, and names the amendment that put it in its present shape.

What are the five grounds for winding up by tribunal under section 271?

Section 271 opens by tying the grounds to the petition route: A company may, on a petition under section 272, be wound up by the Tribunal. The five grounds for winding up by tribunal then follow.

Clause (a), a special resolution. The ground is made out if the company has, by special resolution, resolved that the company be wound up by the Tribunal. The resolution has to name the Tribunal route. This is the only clause the Registrar is barred from petitioning on, which section 272(3) settles.

Clause (b), conduct against State interests. The ground is made out if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality. Section 272(1)(f) gives this clause its own petitioner: in a case falling under clause (b) of section 271, the petition may be presented by the Central Government or a State Government.

Clause (c), fraudulent conduct, found on an application. This clause has more moving parts than the others. It applies if on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act, the Tribunal is of the opinion that the affairs of the company have been conducted in a fraudulent manner or the company was formed for fraudulent and unlawful purpose or the persons concerned in the formation or management of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith and that it is proper that the company be wound up.

Three findings sit inside that one clause: fraudulent conduct of affairs, formation for a fraudulent and unlawful purpose, and fraud, misfeasance or misconduct by the persons concerned in the formation or management. Each is an alternative. On top of whichever is found, the Tribunal must also be of the opinion that it is proper that the company be wound up. An investigation into the company's affairs is one route by which such material reaches the Central Government, and section 224(2) gives the Central Government its own petition route off an inspector's report.

Clause (d), a filing default. The ground is made out if the company has made a default in filing with the Registrar its financial statements or annual returns for immediately preceding five consecutive financial years. Note the two limbs joined by "or": either set of filings will do.

Clause (e), just and equitable. The ground is made out if the Tribunal is of the opinion that it is just and equitable that the company should be wound up. It is the only clause that names no conduct at all.

Why does section 270 come first, and what does it do?

Chapter XX is split into Parts, and section 270 is the switch that points at the live one. It reads, in full: The provisions of Part I shall apply to the winding up of a company by the Tribunal under this Act. Part I is headed Winding up by the Tribunal, and runs from section 271 to section 303.

That one sentence is all section 270 now says, and the reason is the amendment history. Section 270 was substituted by Act 31 of 2016, section 255 and the Eleventh Schedule, with effect from 15 November 2016, and section 271 was substituted by the same section and Schedule on the same date. Part II of the Chapter, headed Voluntary winding up, is printed as omitted by the same provision, and every one of sections 304 to 323 under it carries an omitted heading.

The reach of the same amendment is worth seeing in one place, because it explains why the Tribunal route is the only one the Act still carries for a winding up. All seventeen sections of Chapter XIX, sections 253 to 269 on revival and rehabilitation of sick companies, are printed as omitted headings by that same section 255 and Eleventh Schedule, with effect from the same date.

Who can petition on which ground?

The grounds and the petitioners are set in two different sections, and they do not map one to one. Section 272(1) lists six classes of petitioner: the company; any contributory or contributories; all or any of the persons in clauses (a) and (b); the Registrar; any person authorised by the Central Government in that behalf; and, in a case falling under clause (b) of section 271, the Central Government or a State Government.

Two restrictions cut across that list. The Registrar may petition except on the grounds specified in clause (a), and only with the previous sanction of the Central Government. And clause (c) of section 271 is not a free standing ground at all: it is only reached on an application made by the Registrar or any other person authorised by the Central Government by notification under this Act.

How is a winding up ground different from a strike off?

Both end the company, and they are separate machinery. A winding up on the section 271 grounds runs through the Tribunal, produces a Company Liquidator and ends in a dissolution order. A strike off under sections 248 to 252 is an administrative removal of the name from the register by the Registrar, and section 248(8) preserves the Tribunal's winding up power alongside it.

Two neighbouring routes are also worth separating from section 271. An oppression and mismanagement application under section 241 is one remedy capable of being the some other remedy section 273(2) speaks of; the sub-section names none. And an unregistered company is wound up on the three circumstances in section 375(3), not on the five grounds in section 271, and section 375(2) separately bars it from being wound up voluntarily. Section 376, in the same Part, reaches a foreign company: a body corporate incorporated outside India which has been carrying on business in India, ceases to carry on business in India may be wound up as an unregistered company under this Part, notwithstanding that it has been dissolved under the law of the country where it was incorporated.

Reading the grounds for winding up by tribunal therefore means checking three things in order: which of the five clauses of section 271 the petition names, whether the petitioner is one section 272 allows for that clause, and whether the ground is one section 273(2) lets the Tribunal decline to act on. The dates on the sections matter too. The Insolvency and Bankruptcy Code, 2016 reshaped the Part with effect from 15 November 2016, substituting sections 270, 271, 272 and 280, substituting sub-section (2) of section 275 and omitting sub-section (4), omitting section 289, and omitting Part II of the Chapter entirely. Part I has been amended since: section 272(3) by Act 22 of 2019, section 37, with effect from 15 August 2019, and sections 284 and 302 by Act 29 of 2020, sections 46 and 47, with effect from 21 December 2020.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.