THE LEGAL BRIDGE

Judiciary & Law Notes Series

THE COMPANIES ACT, 2013

CHAPTER XX — Part IV

Official Liquidators

Sections 359–365

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Official Liquidator • Summary Procedure • Dissolution Order

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Chapter XX Part IV — Official Liquidators

Part IV of Chapter XX (Sections 359 to 365) deals with the Official Liquidator — an officer appointed by the Central Government who can be attached to the Tribunal as a standing liquidator. Historically, the Official Liquidator was the primary liquidation officer attached to the High Courts under the 1956 Act. Under the 2013 Act, the Official Liquidator continues to function as an officer of the Central Government and supports the Tribunal — including in the special 'summary procedure for liquidation' under Section 361.

Part IV also contains two important procedural provisions specific to certain classes of winding up: Section 361 (summary procedure for liquidation of companies with limited assets) and Section 362 (sale of assets and recovery of debts). Understanding the distinction between the Official Liquidator (a permanent government officer) and the Company Liquidator (a professional appointed from the panel) is essential.

Section 359 — Appointment of Official Liquidator

(1) Official Liquidator as a Central Government Officer

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, Deputy or Assistant Official Liquidators as it may consider necessary to discharge the functions of the Official Liquidator. 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.

(2) Qualification

The Official Liquidator shall exercise such powers and perform such duties as the Central Government may prescribe. He shall be a whole-time officer. He works under the superintendence of the Regional Director of the Ministry of Corporate Affairs.

(3) Attachment to Courts / Tribunal

The Official Liquidator shall be attached to such Tribunal as may be notified by the Central Government. In practice, the Official Liquidator's offices are located in major cities — Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Ahmedabad, Hyderabad, and others — corresponding to the benches of the NCLT. Pre-IBC winding-up proceedings that were transferred from the High Courts are often handled by the Official Liquidator attached to that jurisdiction.

Section 360 — Powers and Functions of Official Liquidator

The Official Liquidator shall exercise such powers and perform such duties as the Central Government may prescribe. He shall have all the powers of a receiver and can, subject to the Tribunal's orders and the provisions of the Act:

• Take over and hold custody of the assets of the company;
• Sell and realise the movable and immovable properties;
• Receive claims from creditors and contributories and verify them;
• Distribute the proceeds in accordance with the statutory priority under Sections 326 and 327;
• Commence, prosecute, or defend suits on behalf of the company;
• Exercise all such powers as the Tribunal may delegate;
• Submit periodical reports to the Tribunal and to the Central Government (through the Regional Director).

The Official Liquidator may also be appointed as the provisional liquidator under Section 273(1)(c) — where immediate protection of assets is required even before the winding-up order is passed. The Official Liquidator's acts in this interim capacity are binding on the company until the winding-up order is made or the petition is dismissed.

Section 361 — Summary Procedure for Liquidation

(1) When the Summary Procedure Applies

Where the Company to be wound up under this Chapter —

• Has assets of book value not exceeding ₹1 crore; and
• Belongs to such class or classes of companies as may be prescribed,

The Central Government may order it to be wound up by summary procedure provided under this Part. The summary procedure is designed for small-to-medium companies whose winding-up would otherwise consume disproportionate time and professional fees.

(2) Role of the Official Liquidator

Where an order under sub-section (1) is made, the Central Government shall appoint the Official Liquidator as the liquidator of the company. The Official Liquidator shall forthwith take into his custody or control all assets, effects, and actionable claims to which the company is or appears to be entitled. The Official Liquidator shall, within 30 days of his appointment, submit a report to the Central Government in such manner and form, as may be prescribed, including a report whether in his opinion, any fraud has been committed in promotion, formation or management of the affairs of the company or not.

(3) Action on Report of Fraud

On receipt of the report under sub-section (2), if the Central Government is satisfied that any fraud has been committed by the promoters, directors or any other officer of the company, it may direct further investigation into the affairs of the company and that a report shall be submitted within such time as may be specified. After considering the investigation report, the Central Government may order that winding-up may be proceeded under Part I of this Chapter or under the provisions of this Part.

(4) Submission of Report Where No Fraud

If the Central Government, on the basis of the report of the Official Liquidator, is satisfied that no fraud has been committed and no further investigation is necessary, the Official Liquidator shall proceed with the winding-up under this Part and submit his report along with the final winding-up accounts to the Central Government.

Section 362 — Sale of Assets and Recovery of Debts Due to Company

The Official Liquidator shall expeditiously dispose of all the assets whether movable or immovable within a period of sixty days of his appointment. The Official Liquidator shall serve a notice within thirty days of his appointment, on every debtor or contributory, to deposit, within thirty days of receipt of such notice, the amount payable to the company. Where any debtor or contributory does not deposit the amount within the period specified in the notice, the Central Government may, on an application by the Official Liquidator, pass such orders as it thinks fit.

The 60-day and 30-day timelines illustrate the intentional brevity of the summary procedure. The emphasis is on expeditious realisation and distribution.

Section 363 — Settlement of Claims of Creditors by Official Liquidator

The Official Liquidator within thirty days of his appointment shall call upon the creditors of the company to prove their claims in such manner as may be prescribed, within thirty days of the receipt of such call. The Official Liquidator shall prepare a list of claims of creditors in such manner as may be prescribed and each creditor shall be communicated of the claims accepted or rejected along with reasons to be recorded in writing.

Section 364 — Appeal by Creditor

Any creditor aggrieved by the decision of the Official Liquidator under section 363 may file an appeal before the Central Government within thirty days of such decision. The Central Government may after calling the report from the Official Liquidator either dismiss the appeal or modify the decision of the Official Liquidator. The Official Liquidator shall make the payment to the creditors whose claims have been accepted.

The Central Government may, at any stage during settlement of claims, if considers necessary, refer the matter to the Tribunal for necessary orders.

Section 365 — Order of Dissolution of Company

(1) Application for Dissolution

The Official Liquidator shall, if he is satisfied that the company is finally wound up, submit a final report to —

• The Central Government, in case no reference was made to the Tribunal under sub-section (2) of section 364; and
• In any other case, the Central Government and the Tribunal.

(2) Order of Dissolution

The Central Government, or as the case may be, the Tribunal on receipt of such report shall order that the company be dissolved. Where an order is made under sub-section (2), the Registrar shall strike off the name of the company from the register of companies and publish a notification to this effect.

Distinguishing the Official Liquidator from the Company Liquidator

Summary Procedure — Stepwise Flow

Although rarely examined in granular detail, an examinee should be able to reconstruct the broad flow of the summary liquidation procedure:

1. Central Government issues an order under Section 361(1) — summary procedure applies — for a company with book-value assets up to ₹1 crore in the prescribed class;Central Government appoints the Official Liquidator [Section 361(2)];Official Liquidator takes custody of assets;Within 30 days — Official Liquidator submits an initial report to the Central Government, indicating whether any fraud appears [Section 361(2)];If fraud: CG may order further investigation; ultimately either back to Part I or continue under Part IV [Section 361(3)];If no fraud: Official Liquidator proceeds under Part IV [Section 361(4)];Within 30 days of appointment — notices to debtors and contributories (Section 362) and calls for creditor claims (Section 363);Within 60 days — Official Liquidator is required to dispose of the assets (Section 362);Settlement of claims; appeals to Central Government (Section 364);Final report and dissolution order by Central Government (if no Tribunal reference) or Tribunal (Section 365);Registrar strikes off the company's name from the register and publishes notification.

Role and Ongoing Relevance Post-IBC

After the enactment of the Insolvency and Bankruptcy Code, 2016, the field of 'insolvency-driven' liquidation has shifted substantially to the IBC framework — where a Liquidator (an Insolvency Professional registered under the IBC) is appointed after failure of the Corporate Insolvency Resolution Process. However, the Official Liquidator's role and Part IV of Chapter XX continue to be relevant in the following situations:

• Winding-up ordered under Section 271 on grounds other than inability to pay debts (e.g., special resolution, fraud, acts against sovereignty, 5-year default in filings, just and equitable);
• Summary winding-up of small companies under Section 361;
• Transferred proceedings from the High Courts under the transitional provisions — many such winding-up petitions pending as of 15 December 2016 continue under Part I / Part III / Part IV of Chapter XX;
• Collection of unclaimed dividends / undistributed assets (Section 352);
• Disposal of books and papers and post-dissolution matters.

Some Prescribed Forms and Practical Touchpoints

• Form No. WIN-1 — Petition for winding up by the Tribunal under Section 272;
• Form No. WIN-2 to WIN-9 — Various affidavits, notices, and orders in the winding-up process;
• Form No. WIN-10 — Notice to debtor or contributory under Section 362 (summary procedure);
• Form No. WIN-11 — Claim form for creditors in summary procedure;
• The Companies (Winding Up) Rules, 2020 (notified on 24 January 2020) — prescribe the detailed procedural law for winding up under Part I and the summary procedure under Part IV.