Companies Act Section 283

Companies Act, Section 283: Custody of Company’s Properties Upon Winding Up

Section 283 of the Companies Act, 2013 deals with the critical aspect of custody and control of a company’s assets after a winding up order has been passed or a provisional liquidator has been appointed by the National Company Law Tribunal (NCLT). This provision ensures that the property and interests of the company are safeguarded and that the Company Liquidator (or Provisional Liquidator) is empowered to act swiftly in taking control of the company’s assets for the orderly liquidation process.

1. Immediate Custody and Control of the Company’s Assets by the Liquidator

Once the Tribunal has made an order for the winding up of a company, or appointed a Provisional Liquidator, the following responsibilities arise:

The Company Liquidator or the Provisional Liquidator, as the case may be, shall:
Immediately, and in accordance with the directions of the Tribunal,
Take into custody or under control:
All property,
Effects (i.e., tangible and intangible possessions), and
Actionable claims (legal claims the company can pursue)
To which the company is or appears to be entitled.
The purpose of this provision is to ensure that:

The company’s assets are not misused, hidden, or dissipated,
All properties are secured under the lawful control of the Liquidator,
The liquidation process begins with a clear understanding of the company’s estate.
Steps to Protect and Preserve the Assets

The Liquidator is not only required to take custody but must also take all necessary steps and measures to:

Protect, and
Preserve the company’s assets.
This may include:

Securing physical premises,
Maintaining or insuring valuable assets,
Preventing unauthorized access to financial accounts or digital assets,
Ensuring continuity of records and documentation.
2. Legal Deeming of Custody by the Tribunal

Even before the physical transfer of assets to the Liquidator, the law provides that:

From the date of the winding up order, all property and effects of the company shall be deemed to be in the custody of the Tribunal.
This legal presumption of custody means:

The Tribunal has overriding jurisdiction and control over the company’s assets,
Any interference, sale, transfer, or disposal of assets without permission from the Tribunal is considered unlawful,
The protection of the company’s estate is ensured from the moment the winding up order is passed.
This provision reinforces the legal sanctity of the Tribunal’s control and ensures no unauthorized actions are taken concerning the company’s assets.

3. Power of Tribunal to Direct Transfer of Company Assets to Liquidator

To facilitate the effective and lawful transfer of company assets, the section also provides the Tribunal with the power to issue directions to persons in possession of the company’s property, including those who may be holding such property in a fiduciary or representative capacity.

Who May Be Directed?

The Tribunal may, on an application made by the Company Liquidator or on its own motion, direct the following persons:

Contributories (those liable to contribute to the company’s assets),
Trustees (holding property on behalf of the company),
Receivers, Bankers, Agents, Officers or employees of the company,
Any other person having custody or control of the company’s assets or records.
What Can the Tribunal Direct Them To Do?

Such persons may be required to:

Pay over any money belonging to the company,
Deliver any assets or properties,
Surrender or transfer control of such property,
Produce and hand over books, documents, or records belonging to the company.
These actions must be carried out:

Forthwith, or within such time frame as directed by the Tribunal.
This ensures the unimpeded transfer of the company’s estate into the custody of the Liquidator, thus enabling the proper commencement of the liquidation process.