Section 271(e) of the Companies Act, 2013 ("the Act") permits the NCLT to wind up a company where it is of the opinion that it is just and equitable to do so. The ground is the most flexible of the Section 271 grounds, and it has been used to address situations that do not fit within the specific categories—substratum failure, deadlock, loss of confidence, and quasi-partnership breakdown.
Substratum Failure
The substratum of a company is the purpose for which it was formed. Where the main object for which the company was formed has substantially failed, or where the company's business has become impossible to carry on, the Tribunal may wind it up on the just and equitable ground. The test is not whether the company is making a loss; a company can make a loss and still have a viable substratum. The test is whether the original object has been frustrated.
Deadlock
A complete deadlock in the management of the company—where the shareholders or directors cannot agree on any decision and the company is paralysed—can justify winding up on the just and equitable ground. The deadlock must be functional, not merely a disagreement; the company must be unable to operate.
Loss of Confidence
A justifiable loss of confidence in the management, arising from a lack of probity or from serious breaches of duty, can justify winding up. The loss of confidence must be based on objective facts, not on the petitioner's subjective dissatisfaction.
The Last-Resort Character
Winding up on the just and equitable ground is a remedy of last resort. The Tribunal will not wind up a company where there is an alternative remedy that is less drastic—such as an oppression petition under Section 241 or a buy-out order. The petitioner must show that winding up is the only appropriate remedy.
The just and equitable ground is a safety valve, not a general jurisdiction to resolve shareholder disputes. A petitioner who invokes it must be prepared to show that the company's substratum has failed, that there is a complete deadlock, or that there has been a loss of confidence that makes it impossible for the company to continue.
Call to Action
Anuj Desai & Associates advises petitioners and companies on winding up on the just and equitable ground—from the substratum and deadlock analysis to the alternative remedies and the NCLT procedure. If you are considering a just and equitable winding-up petition, we can help you assess the strength of the case.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
Article 120