Companies Act Section 359

Companies Act, Section 359: Appointment and Structure of Official Liquidators

Section 359 of the Companies Act, 2013 lays down the statutory framework for the appointment, status, and remuneration of the Official Liquidator and his deputies in cases of winding up of companies by the Tribunal. The provision emphasizes the centralized role of the Central Government in overseeing liquidation proceedings and ensuring that the officers responsible for managing such proceedings are accountable, appropriately appointed, and adequately compensated by the Government.

The Official Liquidator is a pivotal figure in the winding-up process, as he is responsible for managing the affairs of the company after the winding-up order is passed by the National Company Law Tribunal (NCLT). Section 359 ensures that the framework for their appointment and functioning is uniform, transparent, and centrally regulated.

1. Authority to Appoint Official Liquidators

Sub-section (1) of Section 359 provides that:

For the purposes of this Act, so far as it relates to the winding up of companies by the Tribunal, the Central Government may appoint as many Official Liquidators, Joint Official Liquidators, Deputy Official Liquidators, or Assistant Official Liquidators as it may consider necessary to discharge the functions of the Official Liquidator.

Key Points:

The power of appointment rests solely with the Central Government. The Central Government has the discretion to assess the number and level of officers required to efficiently handle the volume and complexity of winding-up cases.
The term "as it may consider necessary" gives the Central Government flexibility to increase or decrease appointments depending on workload, jurisdictional needs, or resource availability. These appointments can include:
Official Liquidators: Senior-most officers responsible for overseeing liquidation cases. Joint Official Liquidators: Officers who may share responsibilities in certain cases or jurisdictions.
Deputy Official Liquidators and Assistant Official Liquidators: Supporting officers who assist in operational and investigatory functions. This framework ensures a hierarchical and coordinated structure for the liquidation process.

2. Status of the Appointed Liquidators

Sub-section (2) states:

The liquidators appointed under sub-section (1) shall be whole-time officers of the Central Government.

Key Points:

All appointees under this provision are designated as full-time government employees. They are not part-time or contractual appointees, rather, they are fully committed to public service in the discharge of their duties under the Act. Being whole-time officers implies:
Professional commitment exclusively to their role in liquidation. Accountability to the Government for the discharge of duties. Standardization in training, conduct, and reporting obligations. This enhances public confidence and transparency in the winding-up process.

3. Remuneration and Allowances

Sub-section (3) provides:

The salary and other allowances of the Official Liquidator, Joint Official Liquidator, Deputy Official Liquidator and Assistant Official Liquidator shall be paid by the Central Government.

Key Points:

The entire financial responsibility for the remuneration of liquidators lies with the Central Government. This provision ensures:
Independence of the Liquidator from the company being wound up (avoiding conflict of interest or influence). The company under liquidation is not burdened with the cost of the government-appointed officers.
Liquidators can act impartially and objectively, with no reliance on company funds or stakeholders. The arrangement promotes integrity, autonomy, and efficiency in liquidation proceedings.

Purpose and Significance of Section 359

Section 359 serves multiple critical functions in the context of winding up by the Tribunal:

Centralized Oversight: Ensures that only officers vetted and appointed by the Central Government undertake sensitive and financially significant tasks during winding up.
Uniform Standards: The status and payment of these officers being government-managed ensures consistency in qualifications, training, ethical standards, and accountability.
Institutional Strengthening: Provides the infrastructure necessary to support Tribunal-directed liquidations through a dedicated cadre of experienced officers.