Companies Act Section 293

Companies Act, Section 293- Duties of Company Liquidator Regarding Bookkeeping and Inspection Rights of Creditors and Contributories

Section 293 of the Companies Act, 2013, plays a crucial role in ensuring the transparency and integrity of the liquidation process of a company. It sets forth the statutory duty of the Company Liquidator to maintain comprehensive and accurate records of the winding-up proceedings and also lays down the provisions under which stakeholders such as creditors and contributories may access those records.

This section consists of two sub-sections, each dealing with distinct yet interrelated aspects: first, the obligation of the Company Liquidator to maintain books and records, and second, the right of stakeholders to inspect such records under prescribed conditions.

Sub-section (1): Statutory Obligation to Maintain Proper Books by the Company Liquidator

The first sub-section of Section 293 mandates that every Company Liquidator, once appointed and during the course of the liquidation process, must keep and maintain proper books of account and records. These records must be maintained in the manner prescribed by the relevant rules framed under the Companies Act or any guidelines issued by the regulatory authorities.

These books are not limited merely to financial accounts. They must comprehensively include minutes and detailed records of all proceedings, especially those related to meetings convened during the liquidation process. These meetings may involve the creditors of the company, contributories (i.e., shareholders or members liable to contribute to the assets of the company), the advisory committee (if any), or any other stakeholders directly or indirectly involved in the liquidation.

Furthermore, the Company Liquidator is required to make entries of other important matters that may arise during the liquidation. These could include decisions taken in the course of administration, distribution of assets, adjudication of claims by creditors, settlement of liabilities, realization of the company’s properties and assets, and any other administrative or judicial developments pertaining to the liquidation.

The primary objective behind this provision is to maintain systematic and chronological documentation of all major developments. This ensures accountability on the part of the Company Liquidator and provides a verifiable trail of the actions and decisions made during the winding-up process. It also serves as a protective measure for stakeholders, by making sure that records are available for inspection and legal scrutiny if required.

Sub-section (2): Right of Creditors and Contributories to Inspect Books Maintained by the Company Liquidator

The second sub-section of Section 293 grants specific rights to the creditors and contributories of the company that is being wound up. According to this provision, any such person whether a creditor or a contributory – has the right to inspect the books and records maintained by the Company Liquidator. This right may be exercised either in person or through an authorized agent or representative, depending on the convenience or necessity of the stakeholder.

However, this inspection right is not absolute or unqualified. It is expressly subject to the control and supervision of the Tribunal. That is to say, the National Company Law Tribunal (NCLT) retains the discretion to impose conditions, limitations, or restrictions on such inspections, particularly if there are concerns about confidentiality, misuse of information, disruption to the liquidation process, or any other matter that may not be in the overall interest of the stakeholders or the public.

By placing such inspections under the control of the Tribunal, the law provides a balanced mechanism: it allows transparency and stakeholder engagement while ensuring that such access does not compromise the integrity or efficiency of the liquidation process. For example, a creditor may wish to review financial records to verify the distribution of assets or the ranking of claims, while a contributory may seek to inspect minutes of meetings to understand the resolutions passed regarding the company's remaining assets or liabilities.

The Tribunal, acting in its quasi-judicial capacity, will assess the merits of each inspection request and may grant or deny access based on the principles of fairness, relevance, and necessity. This supervisory role also ensures that the Company Liquidator is not subjected to arbitrary or excessive interference, thereby allowing them to carry out their duties effectively.