Section 271 of the Companies Act, 2013 ("the Act") empowers the NCLT to order the winding up of a company on specified grounds. The provision is residual: the IBC has displaced the winding-up route for most insolvency cases, but Section 271 remains available for non-IBC cases, including companies with liabilities below the IBC threshold, companies in shareholder deadlock, and companies that have defaulted in statutory filings.
The Grounds
The grounds under Section 271 are: the company has by special resolution resolved to be wound up by the Tribunal; the company has acted against the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency, or morality; the company has made a default in filing financial statements or annual returns for the immediately preceding five consecutive financial years; the company is unable to pay its debts; and the Tribunal is of the opinion that it is just and equitable that the company should be wound up.
The five-year non-filing ground is a strict one. A company that has not filed its financial statements or annual returns for five consecutive years is liable to be wound up, and the ROC or any other person authorised by the Central Government may file the petition. The ground is designed to ensure that companies that have been abandoned do not remain on the register indefinitely.
The Procedure
The winding-up petition is filed before the NCLT in the prescribed form. The petition must be accompanied by the documents specified in the rules, including the board resolution, the statement of affairs, and the evidence supporting the ground. The Tribunal hears the petitioner and the company, and it may appoint a provisional liquidator if the circumstances require.
The winding-up order is published in the Official Gazette and in the newspapers, and the liquidator takes control of the company's assets. The liquidator realises the assets, pays the creditors in accordance with the statutory priorities, and distributes the surplus to the members. The company is dissolved at the end of the process.
The Interaction with the IBC
The IBC has overriding effect over the winding-up provisions of the Companies Act. A company that is insolvent and has a debt of at least one crore rupees is within the IBC's jurisdiction, and the winding-up route is not available for that company. Section 271 is therefore confined to companies that are not covered by the IBC, or to grounds such as the five-year non-filing default and the just and equitable ground, which are not necessarily insolvency grounds.
Call to Action
Anuj Desai & Associates advises companies, creditors, and the ROC on compulsory winding up under Section 271—from the ground selection and the petition drafting to the NCLT procedure and the liquidator's role. If you are considering a winding-up petition, we can help you assess the grounds and the procedure.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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