Companies Act Section 290

Companies Act, Section 290: Powers and Duties of the Company Liquidator

Section 290 of the Companies Act, 2013 lays down an extensive and structured framework outlining the powers and responsibilities of the Company Liquidator appointed in a winding-up proceeding initiated by the Tribunal (usually the National Company Law Tribunal-NCLT). This provision ensures that the Liquidator has adequate legal authority to manage the affairs, realize the assets, settle liabilities, and carry out all necessary actions to effect an efficient and lawful winding-up process under the supervision of the Tribunal.

This section is divided into three key subsections. The first details a broad range of powers conferred upon the Liquidator, the second clarifies that these powers must be exercised under the control of the Tribunal, and the third authorizes the Tribunal to impose additional duties as necessary.

Sub-section (1): Powers of the Company Liquidator- Subject to Tribunal Directions

Under sub-section (1), the Company Liquidator is empowered, subject to any directions issued by the Tribunal, to exercise a wide range of powers that are essential to effectively wind up a company. The powers conferred are both administrative and judicial in nature, enabling the Liquidator to manage day-to-day affairs, engage in legal proceedings, and make major decisions concerning the assets and liabilities of the company.

These powers include:

(a) Continuing the Business Temporarily

The Liquidator may carry on the business of the company, but only to the extent necessary for the beneficial winding-up of the company. This allows, for instance, the fulfillment of pending contracts or the realization of better value for business assets.

(b) Executing Documents and Using the Company’s Seal

The Liquidator is authorized to perform all acts and execute documents (e.g., deeds, receipts) in the name and on behalf of the company. Where required, the Liquidator may also use the company’s official seal.

(c) Sale of Property

The Liquidator has the power to sell both immovable and movable property, as well as actionable claims, either through public auction or private contract. The sale can be executed as a whole or in parcels, and can be transferred to any individual or corporate entity.

(d) Sale of Undertaking as a Going Concern

If it is beneficial, the Liquidator may sell the entire undertaking of the company as a going concern, preserving value and potentially retaining employee and customer relationships.

(e) Raising Funds on Security

The Liquidator can raise funds by creating security over the assets of the company, enabling the settlement of urgent liabilities or financing the costs of liquidation.

(f) Legal Proceedings

The Liquidator is empowered to initiate or defend legal proceedings (civil or criminal) in the name and on behalf of the company.

(g) Settling Claims

The Liquidator can invite and settle claims from creditors, employees, and other stakeholders, and is responsible for distributing sale proceeds in accordance with the statutory priority under the Companies Act.

(h) Inspection of Records

The Liquidator is entitled to inspect company records maintained by the Registrar of Companies or any other relevant authority.

(i) Claims in Insolvency Proceedings

If any contributory (i.e., shareholder liable to contribute to company debts) is declared insolvent, the Liquidator may lodge a claim and rank for dividends as a creditor in the insolvency process, treating the balance owed as a separate debt.

(j) Negotiable Instruments

The Liquidator is authorized to draw, accept, make, or endorse negotiable instruments such as cheques, bills of exchange, hundis, or promissory notes in the company’s name. These instruments carry the same legal effect as if executed by the company during its normal operations.

(k) Deceased Contributories

If a contributory has passed away, the Liquidator may apply for letters of administration in his official name to recover debts due from the deceased’s estate. The amount due shall be deemed to be payable to the Liquidator personally for this purpose.

(l) Appointment of Professionals or Agents

The Liquidator may seek professional assistance or appoint qualified agents (such as legal advisors, accountants, valuers, etc.) to help discharge his duties and to protect the company’s assets, especially when he is unable to perform certain functions himself.

(m) Execution of Legal Instruments and Documents

The Liquidator may take any necessary steps and sign, execute, and verify any document or legal instrument required: for the effective winding up of the company, for the distribution of assets, and for fulfilling his duties, obligations, and functions under the Companies Act.
(n) Seeking Tribunal’s Orders

The Liquidator is entitled to apply to the Tribunal for any directions or orders necessary to resolve issues or obtain guidance in connection with the winding-up process.

Sub-section (2): Tribunal’s Supervisory Role

This sub-section provides that the exercise of the powers granted to the Liquidator under sub-section (1) shall remain subject to the overall control of the Tribunal. This means the Liquidator cannot act entirely at his discretion and must function within the framework of accountability and judicial supervision.

For example, the Tribunal may intervene if any action of the Liquidator is challenged by stakeholders, or if the Tribunal finds that the powers are being misused or exercised in a manner detrimental to stakeholders' interests.

Sub-section (3): Additional Duties as Directed by the Tribunal

This sub-section grants the Tribunal the discretion to impose additional duties upon the Company Liquidator beyond those specified in sub-section (1). These duties may vary based on the specific facts and complexity of the case, and the Tribunal may issue such directions by way of an order at any stage of the winding-up.

This ensures procedural flexibility and allows the Tribunal to respond to unique or unforeseen circumstances during the liquidation process.