What Is a Company Liquidator? Section 275

A company liquidator in an Indian winding up is not a role the company chooses. Under section 275 of the Companies Act, 2013 the Tribunal appoints one at the time it passes the winding up order, and since 15 November 2016 the appointee has to be an insolvency professional registered under the Insolvency and Bankruptcy Code, 2016. Section 276 sets out how one is removed. This page reads both sections as printed, including a cross-reference the 2016 substitution left behind.

Who is a company liquidator, and when is one appointed?

At the moment the order is made, not afterwards. Section 275(1) states that For the purposes of winding up of a company by the Tribunal, the Tribunal at the time of the passing of the order of winding up, shall appoint an Official Liquidator or a liquidator from the panel maintained under sub-section (2) as the Company Liquidator.

Two appointees are named in that sentence: an Official Liquidator, who is a Central Government appointment under section 359, or a liquidator taken from what sub-section (2) supplies. The duty is expressed as shall, so the appointment is not optional once the order is passed.

There may already be a liquidator in place by then. Section 273(1)(c) lets the Tribunal appoint a provisional liquidator of the company till the making of a winding up order, at any point after the petition is presented, and section 275(7) lets that person carry straight on: While passing a winding up order, the Tribunal may appoint a provisional liquidator, if any, appointed under clause (c) of sub-section (1) of section 273, as the Company Liquidator for the conduct of the proceedings for the winding up of the company.

What does sub-section (2) actually supply?

Insolvency professionals, and no panel. This is the cross-reference worth pausing on. Sub-section (1) speaks of the panel maintained under sub-section (2), but sub-section (2), as it now stands, reads: The provisional liquidator or the Company Liquidator, as the case may, shall be appointed by the Tribunal from amongst the insolvency professionals registered under the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

There is no panel in it. Sub-section (2) was substituted by Act 31 of 2016, section 255 and the Eleventh Schedule, with effect from 15 November 2016, and sub-section (4) was omitted by the same provision, while sub-section (1) was left as drafted. So the phrase "the panel maintained under sub-section (2)" now points at a sub-section that maintains nothing and instead names a register kept under another Act. A reader working out who is eligible has to read sub-section (2) rather than the phrase in sub-section (1).

Two printing points, stated as printed. Sub-section (2) reads as the case may, without the word "be", and it ends with a semicolon where the sub-sections around it end with a full stop.

What must a Company Liquidator disclose, and how fast?

Within a week of being appointed. Section 275(6) states that On appointment as provisional liquidator or Company Liquidator, as the case may be, such liquidator shall file a declaration within seven days from the date of appointment in the prescribed form disclosing conflict of interest or lack of independence in respect of his appointment, if any, with the Tribunal and such obligation shall continue throughout the term of his appointment.

The last clause is the operative one. The declaration is not a one time filing at the door: the obligation shall continue throughout the term, so a conflict arising in month nine has to be disclosed in month nine. Section 276(1)(e) closes the loop by making conflict of interest or lack of independence during the term of his appointment that would justify removal a ground for removal.

Section 275(5) sets the money and the terms, and it names the factors rather than leaving them at large: the terms and conditions of appointment and the fee payable shall be specified by the Tribunal on the basis of task required to be performed, experience, qualification of such liquidator and size of the company. Four factors: the task, two attributes of the person, and one attribute of the company.

How do a provisional liquidator and a Company Liquidator differ?

By the limits the appointing order sets, and not much else. Section 275(3) states that where a provisional liquidator is appointed, the Tribunal may limit and restrict his powers by the order appointing him or it or by a subsequent order, but otherwise he shall have the same powers as a liquidator.

So the default is parity. The provisional liquidator has the same powers unless the Tribunal cuts them down, either at the outset or later. That default matters because section 273(1)(c) lets the Tribunal appoint one before any winding up order exists, with the second proviso to that sub-section requiring notice to the company first. What those powers are is set by section 290, covered in the powers and duties of a Company Liquidator.

How is a Company Liquidator removed or replaced?

Section 276 handles both, and it separates removal from replacement. Removal under sub-section (1) needs a reasonable cause being shown and for reasons to be recorded in writing, and one of five grounds: (a) misconduct; (b) fraud or misfeasance; (c) professional incompetence or failure to exercise due care and diligence in performance of the powers and functions; (d) inability to act as provisional liquidator or as the case may be, Company Liquidator; and (e) conflict of interest or lack of independence during the term of his appointment that would justify removal.

Replacement under sub-section (2) is wider than removal, because it covers events nobody is at fault for: In the event of death, resignation or removal of the liquidator, the Tribunal may transfer the work assigned to him or it to another Company Liquidator for reasons to be recorded in writing.

Sub-section (3) adds money to the picture. Where the Tribunal is of the opinion that any liquidator is responsible for causing any loss or damage to the company due to fraud or misfeasance or failure to exercise due care and diligence in the performance of his or its powers and functions, it may recover or cause to be recovered such loss or damage from the liquidator and pass such other orders as it may think fit. All three fault limbs there also appear among removal grounds (b) and (c), so the same conduct can cost the office and the money.

Sub-section (4) is the procedural floor for all of it: the Tribunal shall, before passing any order under this section, provide a reasonable opportunity of being heard to the liquidator.

What happens once the appointment is made?

Notice goes out, fast. Section 277(1) gives the Tribunal a period not exceeding seven days from the date of passing of the order to intimate the Company Liquidator or provisional liquidator and the Registrar. Section 277(2) then has the Registrar endorse it in his records, notify the Official Gazette, and, in the case of a listed company, intimate the appointment or order to the stock exchange or exchanges where the securities of the company are listed. That listed company limb is what makes a winding up order a market event, and it sits alongside the rest of the effect of the winding up order.

The liquidator's first substantive filing follows within sixty days. Section 281(1) requires a report to the Tribunal covering, among other things, the nature and details of the assets of the company including their location and value, and its proviso requires that the valuation of the assets shall be obtained from registered valuers for this purpose, which is the section 247 machinery for a registered valuer applied inside a liquidation.

Reading an appointment therefore means checking four things: whether the appointee is an Official Liquidator or an insolvency professional under section 275(2), whether a provisional liquidator was continued under section 275(7), what the Tribunal fixed as terms and fee under section 275(5), and whether the seven day conflict declaration under section 275(6) has been kept current. A company liquidator holds the office at the Tribunal's pleasure, and section 276 is the section that says so.

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.