Companies Act Section 362

Companies Act, Section 362: Sale of Assets and Recovery of Debts Owed to the Company

Section 362 of the Companies Act, 2013 lays down the statutory obligations and procedures that the Official Liquidator must follow in relation to the disposal of the company’s assets and the recovery of amounts due to the company from its debtors or contributories during the liquidation process. This section ensures a time-bound mechanism for asset realization and debt recovery to facilitate an efficient and orderly winding up of the company’s affairs.

1. Time-bound Disposal of Assets by the Official Liquidator:

Upon being appointed, the Official Liquidator is entrusted with the responsibility of dealing with all assets of the company under liquidation. These assets may include both movable properties (such as vehicles, inventory, furniture, machinery, etc.) and immovable properties (such as land, buildings, and other real estate holdings).

To ensure that the liquidation process does not face undue delays and that the creditors or stakeholders of the company can be repaid in a timely manner, the law mandates that the Official Liquidator must complete the disposal of all such assets within a period of sixty (60) days from the date of his appointment. The disposal process should be conducted expeditiously and in a manner that maximizes the realization value for the benefit of creditors and other claimants.

2. Notice to Debtors and Contributories to Settle Outstanding Dues:

In addition to liquidating the assets, the Official Liquidator must also ensure that all amounts owed to the company either by its debtors (persons or entities who have borrowed or owe money to the company) or by contributories (typically the shareholders or members liable to contribute to the company’s assets in the event of its winding up) are duly recovered.

To initiate this process, the Official Liquidator is required to serve a written notice to such debtors or contributories within thirty (30) days from the date of his appointment. This notice must clearly direct the concerned persons to deposit the amounts due to the company within a further period of thirty (30) days from the date of service of such notice. This provision ensures that all parties who owe money to the company are given a formal and fair opportunity to fulfil their financial obligations within a reasonable timeline.

3. Legal Recourse in Case of Non-Payment:

If any of the debtors or contributories fail to comply with the Official Liquidator’s notice and do not make the required payment within the stipulated period, the Official Liquidator is empowered to escalate the matter.

In such cases, the Official Liquidator may file an application before the Central Government, requesting appropriate directions or orders for the recovery of the unpaid amounts. Upon receiving such an application, the Central Government may, after examining the matter, pass such orders as it deems fit to facilitate the recovery of dues owed to the company. This provision grants the Official Liquidator the authority to seek enforcement measures through governmental intervention in instances of non-cooperation or default.

4. Deposit of Recovered Amounts as per Section 349:

Any money or value recovered by the Official Liquidator whether from the sale of assets or from debtors and contributories must be handled in accordance with the prescribed financial procedures laid down under Section 349 of the Companies Act, 2013.

Section 349 outlines the manner in which such funds are to be deposited, typically into the Company Liquidation Account in the Public Account of India or other designated accounts, depending on the circumstances and rules framed by the Central Government. The purpose of this provision is to ensure proper accounting, traceability, and transparency in the handling of liquidation proceeds.