Official Liquidators

448.      Appointment of Official Liquidator.

            (1)        For the purposes of this Act, so far as it relates to the winding up of companies by the Court –

                        (a)        there shall be attached to each High Court, an Official Liquidator appointed by the Central Government, who shall  be a whole-time officer, unless the Central Government considers that there will not be sufficient work for a whole-time officer in which case a part-time officer may be  appointed; and

                        (b)        the Official Receiver attached to a District Court for insolvency  purposes, or if there is no such Official Receiver then, such person as the Central Government may, by notification in the Official Gazette appoint for the  purpose, shall be the Official  Liquidator  attached  to  the District Court.

            2[(1A)   The Central Government may appoint one or more  Deputy or Assistant Official Liquidators to assist the Official Liquidator in the discharge of his functions.]

            (2)        All  references to the " Official Liquidator " in  this  Act shall  be construed as references to the Official Liquidator  referred to in clause (a) or clause (b), as the case may be, of sub-section (1) 1[and as including  references  to  Deputy or Assistant Official Liquidators appointed under sub-section (1A)].

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1.   Ins. by Act 65 of 1960, s. 165.

2.   Ins. by s. 166, ibid.

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449.      Official Liquidator to be liquidator.

            On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company.

450.      Appointment and powers of provisional liquidator.

            (1)        At any time after the presentation of a winding up petition and before the  making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally.

            (2)        Before appointing a provisional liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.

            (3)        Where  a provisional  liquidator is appointed by the  Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.

            (4)        The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made.

451.      General provisions as to liquidators.

            (1)        The liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose.

            (2)        Where the Official liquidator becomes or acts as liquidator, there shall be paid to the   Central Government out of the assets of the company such fees as may be prescribed.

            (3)        The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification;

                        Provided that nothing in his sub-section shall be deemed to give validity to acts done by a liquidator after his appointment has been shown to be invalid.

452.      Style, etc., of liquidator.

            A liquidator shall be described by the style of "The Official Liquidator" of the particular company in respect of which he acts, and not by his individual name.

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1.   Ins. by Act 65 of 1960, s. 166.

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453.      Receiver not to be appointed of assets with liquidator.

            A receiver shall not be appointed of assets in the hands of a liquidator except by, or with the leave of, the Court.

454.      Statement of affairs to be made to Official Liquidator.

            (1)        Where the Court has made a winding up order or appointed the Official Liquidator as provisional liquidator, unless the Court in its discretion otherwise orders, there shall be made out and submitted to the Official Liquidator a statement as to the affairs of the  company in the prescribed form, verified by an affidavit, and containing the following particulars, namely –

                        (a)        the assets of the company, stating separately the  cash balance  in hand and at the bank, if any, and the  negotiable securities, if any, held by the company;

                        (b)        its debts and liabilities;

                        (c)        the names, residences and occupations of its creditors, stating separately the amount of secured and unsecured debts; and in the case of secured debts, particulars of  the securities  given,  whether  by the  company  or  an  officer thereof, their value and the dates on which they were given;

                        (d)        the debts due to  the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised on account thereof;

                        (e)        such further or other information as may be prescribed, or as the Official Liquidator may require.

            (2)        The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section  mentioned, as the Official Liquidator,  subject  to  the direction  of  the  Court,  may  require  to  submit  and  verify  the statement, that is to say, persons –

                        (a)        who are or have been officers of the company;

                        (b)        who have taken part in the formation of the company  at any time within one year before the relevant date;

                        (c)        who are in the employment of the company, or have  been in  the employment of the company within the said  year, and are, in the opinion of the Official Liquidator,  capable  of giving the information required;

                        (d)        who are or have been within the said year officers  of, or  in the employment of, a company which is, or  within  the said  year  was,  an  officer of the  company  to  which  the statement relates.

            (3)        The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding three months from that date as the Official Liquidator or the Court may, for special reasons, appoint.

            (4)        Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the Official liquidator or provisional liquidator, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the Official Liquidator may consider reasonable, subject to an appeal to the Court.

            1[(5)      If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with  fine which may extend to one hundred rupees  for  every  day during which the default continues, or with both.

            (5A)      The Court by which the winding up order is  made  or  the provisional liquidator is appointed, may take cognizance of an offence under sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure  laid  down in the Code of Criminal Procedure, 1898, (5 of 1898.) 2[for the trial of summons cases by magistrates.]]

            (6)        Any  person stating, himself in writing to be a creditor  or contributory  of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract there from.

            (7)        Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Indian Penal Code; (45 of 1860.)  and shall, on the application of the Official Liquidator, be punishable accordingly.

            (8)        In this section, the expression "the relevant date" means, in a case where a provisional liquidator is appointed, the date of his appointment, and in a case where no such appointment is made, the date of the winding up order.

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1.   Subs. by Act 65 of 1960, s. 167, for sub-section (5).

2.   See now the Code of Criminal Procedure, 1973 (2 of 1974).

455.      Report by Official Liquidator.

            (1)        In a case where a winding up order is made, the Official Liquidator shall, as soon as practicable after receipt of the statement to be submitted  under section 454 and not later than six months from the date of the  order, 1[or such extended period as may be allowed by the Court] or in a case where the Court orders that no statement need be submitted, as soon as practicable after the date of the order, submit a preliminary  report to the Court –

                        (a)        as to the amount of capital issued, subscribed, and paid up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of (i) cash and negotiable securities; (ii) debts due from contributories; (iii) debts due to the company and securities, if any, available in respect thereof; (iv) movable and immovable properties belonging to the company; and (v) unpaid calls;

                        (b)        if the  company has failed, as to the  causes  of  the failure; and

                        (c)        whether,  in his opinion, further inquiry is  desirable as to any matter relating to the promotion,  formation,  or failure  of  the  company, or the  conduct  of  the  business thereof.

            (2)        The Official Liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any officer of the company in relation to the company since the formation thereof, and any other matters which, in his opinion, it is desirable to bring to the notice of the Court.

            (3)        If the Official Liquidator states in any such further report that in his opinion a fraud has been committed as aforesaid, the Court shall have the further powers provided in section 478.

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Delivery of property to liquidator

468.      Delivery of property to liquidator.

            The Court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, 1[officer or other employee] of the company, to pay, deliver surrender or transfer forthwith, or within such time as the Court directs, to the liquidator, any money, property or books and papers 2[in his custody or under his control] to which the company is  prima facie entitled.

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1.   Subs. by Act 65 of 1960, s. 175, for "or officer".

2.   Subs. by s. 175, ibid., for "in his hands".

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469.      Payment of debts due by contributory and extent of set-off.

            (1)        The Court may, at any time after making a winding up order, make an order on any contributory for the time being on the list of contributories to pay, in the manner directed by the order, any money due to the company, from him or from the estate of the person whom he represents, exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Act.

            (2)        The Court, in making such an order, may –

                        (a)        in the case of an unlimited company, allow to the contributory,  by way of set-off, any money due to him or to the estate which he represents, from the  company, on  any independent  dealing or contract with the company,  but  not any money due to him as a member of the company in respect of any dividend or profit; and

                        (b)        in the case of a limited company, make to any director, managing  agent, secretaries and treasurers or manager  whose liability is unlimited, or to his estate, the like allowance.

            (3)        In  the case of any company, whether limited  or  unlimited, when all the creditors have been paid in full, any money due on any account whatever to a contributory from the company may be allowed to him by way of set-off against any subsequent call.

470.      Power of Court to make calls.

            (1)        The Court may, at any time after  making  a winding up order and either before or  after  it  has ascertained the sufficiency of the assets of the company –

                        (a)        make calls on all or any of the contributories for  the time  being on the list of the contributories, to the  extent of their liability, for payment of any money which the  Court considers  necessary to satisfy the debts and liabilities  of the  company, and the costs, charges and expenses of  winding up, and  for the  adjustment of the rights of the contributories among themselves; and

                        (b)        make an order for payment of any calls so made.

            (2)        In making a call, the Court may take into consideration the probability that some of the contributories may, partly or wholly, fail to pay the call.

471.      Payment into bank of moneys due to company.

            (1)        The Court may order any contributory, purchaser or other person from whom any money is due to the company to pay the money into the public account of India in the Reserve Bank of India instead of to the liquidator.

            (2)        Any such order may be enforced in the same manner as if the Court had directed payment to the liquidator.

472.      Moneys and securities paid into Bank to be subject to order of Court.

            All moneys, bills, hundis, notes and other securities paid or delivered into the Reserve Bank of India in the course of the winding up of a company by the Court, shall be subject in all respects to the orders of the Court.

473.      Order on contributory to be conclusive evidence.

            (1)        An order made by the Court on a contributory shall, subject to any right of appeal, be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due.

            (2)        All  other  pertinent matters stated in the order  shall be taken to be truly stated as against all persons and in all proceedings whatsoever.

474.      Power to exclude creditors not proving in time.

            The Court may fix  a time or times within which creditors are  to  prove their debts  or  claims or to be excluded from the  benefit of any distribution made before those debts or claims are proved.

475.      Adjustment or rights of contributories.

            The Court shall adjust the rights of the contributories among themselves, and distribute any surplus among the persons entitled thereto.

476.      Power to order costs.

            The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order for the payment out of the assets, of the costs, charges and expenses incurred in the winding up, in such order of priority inter se as the Court thinks just.

477.      Power to summon persons suspected of having property of company, etc.

            (1)        The Court may, at any time after the appointment of a provisional liquidator or the making of a winding up order summon before it any officer of  the company or person known or suspected to have in his possession any property or books  or  papers,  of  the company,  or known or suspected to be indebted to the company, or any person whom the Court deems capable of giving information  concerning the promotion, formation, trade, dealings, property, books or  papers, or affairs of the company.

            (2)        The Court may examine any officer or person so summoned on oath concerning the matters aforesaid, either by word of mouth or on written interrogatories; and may, in the former case, reduce his answers to writing and require him to sign them.

            (3)        The Court may require any officer or person so summoned to produce any books and papers in his custody or power relating to the company; but, where he claims any lien on books or papers produced by him, the production shall be without prejudice to that lien, and the Court shall have jurisdiction in the winding up to determine all questions relating to that lien.

            (4)        If any officer or person so summoned, after being paid or tendered a reasonable sum for his expenses, fails to appear before the Court at the time appointed, not having a lawful impediment (made known to the Court at the time of its sitting and allowed by it), the Court may cause him to be apprehended and brought before the Court for examination.

            1[(5)      If, on his examination, any officer or person so summoned admits that he is indebted to the company, the Court may order him to pay to the provisional liquidator or, as  the case may be the liquidator at such time and in such manner as to the Court  may  seem just, the amount in which he is indebted, or any part thereof,  either in full discharge of the whole amount or not, as the Court thinks fit, with or without costs of the examination.

            (6)        If, on his examination, any such officer or person admits that he has in his possession any property belonging to the company, the Court may order him to deliver to the provisional liquidator or as the case may be, the liquidator, that property or any part thereof at such time, in such manner and on such terms as to the Court may seem just.

            (7)        Orders made under sub-sections (5) and (6) shall be executed in the same manner as decrees for the payment of money or for the delivery of property under the Code of Civil Procedure, 1908, (5 of 1908.)  respectively. 

            (8)        Any person making any payment or delivery in pursuance of an order made under sub-section (5) or sub-section (6) shall by such payment or delivery be, unless otherwise directed  by  such  order, discharged  from all liability whatsoever in respect of such  debt  or property.]

478 .     Power to order public examination of promoters, directors, etc.

            (1)        When an order has been made for winding up a company by the Court, and the Official Liquidator has made a report to the Court under this Act, stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed  by it for that purpose, and be publicly examined as to  the promotion or formation or the conduct of the business of the  company, or as to his conduct and dealings as an officer thereof.

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1.   Ins. by Act 65 of 1960, s. 176.

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            (2)        The Official Liquidator shall take part in the examination, and for that purpose may, if specially authorized by the Court in that behalf, employ such legal assistance as may be sanctioned by the Court.

            (3)        Any creditor or contributory may also take part in the examination either personally or by any advocate, attorney or pleader entitled to appear before the Court.

            (4)        The Court may put such questions to the person examined as it thinks fit.

            (5)        The  person  examined shall be examined on oath,  and  shall answer all such questions as the Court may put, or allow to be put, to him.

            (6)        A person ordered to be examined under this section –

                        (a)        shall, before his examination, be furnished at his  own cost with a copy of the Official Liquidator's report; and

                        (b)        may  at  his own cost employ an advocate,  attorney  or pleader entitled to appear before the Court, who shall be at liberty to put to him such questions as the Court  may  deem just for the purpose of enabling him to explain  or qualify any answers given by him.

            (7)        (a)        If any such person applies to the Court to be exculpated from  any charges made or suggested against him, it shall be the duty of the Official Liquidator to appear on the hearing of the application and call the attention of the Court to any matters which appear to the Official Liquidator to be relevant.

                        (b)        If the Court, after hearing any evidence given or witnesses called  by the Official Liquidator, grants the application, the Court may allow the applicant such costs as it may think fit.

            (8)        Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined; and may  thereafter be used in evidence against him, and shall be open to the inspection of any creditor or contributory  at  all  reasonable times.

            (9)        The Court may, if it thinks fit, adjourn the examination from time to time.

            (10)       An examination under this section may, if the Court so directs and subject to any rules made in this behalf, be held before any District Judge, or before any officer of the High Court, being an official Referee, Master, Registrar or Deputy Registrar.

            (11)       The powers of the Court under this section as to the conduct of the examination, but not as to costs, may be exercised by the Judge or officer before whom the examination is held in pursuance of sub-section (10).

479.      Power to arrest absconding contributory.

            At any time either before or after making a winding up order, the Court may, on proof of probable cause for believing that a contributory is about to quit India or otherwise to abscond, or is about to remove or conceal any of his property, for the purpose of evading payment of calls or of avoiding examination respecting the affairs of the company, cause –

            (a)        the contributory to be arrested and safely kept  until such time as the Court may order; and

            (b)        his books and papers and movable property to be  seized and safely kept until such time as the Court may order.

480.      Saving of existing powers of Court.

            Any powers conferred  on the  Court by this Act shall be in addition to, and not in  derogation of, any existing powers of instituting proceedings against any contributory  or  debtor  of  the  company,  or  the estate of any contributory or debtor, for the recovery of any call or other sums.

481.      Dissolution of company.

            (1)        When the affairs of a company have been completely wound up 1[or when the Court is of the opinion that the liquidator cannot proceed with the winding up of  a  company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an  order of dissolution of the company should be made], the Court shall make an order  that the company be dissolved from the date of the  order, and the company shall be dissolved accordingly.

            (2)        A copy of the order shall, within 2[thirty] days from the date thereof, be forwarded by the liquidator the Registrar who shall make in his books a minute of the dissolution of the company.

            (3)        If the liquidator makes default in forwarding  a  copy as aforesaid he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

Enforcement of and appeal from orders

482.      Order made to any Court to be enforced by other Courts.

            Any order made by a Court for, or in the course of, winding up a company shall be enforceable at any place in India, other than that over which such Court has jurisdiction, by the Court which would have had jurisdiction in respect of the company if its registered office had been situate at such other place, and in the same manner in all respects as if the order had been made by that Court.

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1.   Ins. by Act 65 of 1960, s. 177.

2.   Subs. by  Act  31 of 1965, s. 62  and Sch.,  for  "fourteen" (w.e.f. 15-10-1985).

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483.      Appeals from orders.

            Appeals from any order made, or decision given, in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the  same  manner in which,  and  subject to the same conditions under which, appeals lie from  any order or decision of the Court in cases within its  ordinary jurisdiction.

Notice by liquidator of his appointment

516.      Notice by liquidator of his appointment.

            (1)        The liquidator shall, within 3[thirty] days after his appointment, publish in   the Official Gazette, and deliver to the Registrar for registration, a notice of his appointment in the form prescribed.

            (2)        If the liquidator fails to comply with sub-section (1), he shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

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1.   Subs. by Act 65 of 1960, s.180, for  "the Court may appoint  a liquidator".

2.   Subs. by s.180, ibid., for sub-section (2).

3.   Subs.  by  Act  31 of 1965, s.62  and  Sch.  for  "twenty-one" (w.e.f.15-10-1965).

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517.      Arrangement when binding on company and creditors.

            (1)        Any arrangement  entered  into between a company about to be, or in  the course  of  being, wound up and its creditors shall,  subject  to the right  of appeal under this section, be binding on the company and on the  creditors  if  it is sanctioned by a special  resolution of the company  and  acceded to by three-fourths in number and value  of  the creditors.

            (2)        Any creditor or contributory may, within three weeks from the completion of the arrangement, appeal to the Court against it and the Court may thereupon, as it thinks just, amend, vary, confirm or set aside the arrangement.

518.      Power to apply to Court to have questions determined or powers exercised. 

            (1)        The liquidator or any contributory or creditor may apply to the Court –

                        (a)        to determine any question arising in the winding up of a  company; or

                        (b)        to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court.

            (2)        The liquidator or any creditor or contributory may apply to the Court specified in sub-section (3) for an order setting aside any attachment, distress or execution put into force against the estate or effects of the company after the commencement of the winding up,

            (3)        An application under sub-section (2) shall be made –

                        (a)        if  the attachment, distress or execution is levied  or put into force by a High Court, to such High Court; and

                        (b)        if the attachment, distress or execution is levied  or put into force by any other Court, to the Court having jurisdiction  to wind up the company.

            (4)        The Court, if satisfied on an application under sub-section (1)  or  (2) that the determination of the question  or  the  required exercise  of  power  or  the  order  applied  for  will  be  just  and beneficial, may accede wholly or partially to the application on  such terms and conditions as it thinks fit, or may make such other order on the application as it thinks just.

            (5)        A copy of an order staying the proceedings in the winding up, made by virtue of this section, shall forthwith be forwarded by the company, or otherwise as may be prescribed, to the Registrar, who shall make a minute of the order in his books relating to the company.

519.      Application of liquidator to Court for public examination of promoters, directors, etc.

            (1)        The liquidator may make a report to the Court stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company or by any officer of the company in relation to the company since its formation; and the Court may, after considering the report, direct that that person or officer shall attend before the Court on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to  his conduct and dealings as officer thereof.

            (2)        The provisions of sub-sections (2) to (11) of section 478 shall apply in relation to any examination directed under sub-section (1) as they apply in relation to an examination directed under sub-section (1) of section 478 with references to the liquidator being substituted for references to the Official Liquidator in those provisions.

520.      Costs of voluntary winding up.

            All costs, charges and expenses properly incurred in the winding up, including   the remuneration of the liquidator, shall subject to the rights of secured creditors, if any, be payable out of the assets of the company in priority to all other claims.

521.      [Saving of right of creditors and contributories to apply for winding up.] Rep. by the Companies (Amendment) Act, 1960 (65 of 1960), s. 181.

522.      Power to order winding up subject to supervision.

            At any time after a company has passed a resolution for voluntary winding up, the Court may make an order that the voluntary winding up shall continue, but subject to such supervision of the Court, and with such liberty for creditors, contributories or others to apply to the Court, and generally on such terms and conditions, as the Court thinks just.

523.      Effect of petition for winding up subject to supervision.         

            A petition for the continuance of a voluntary winding up subject to the supervision of the Court shall, for the purpose of giving jurisdiction to the Court over suits and legal proceedings, be deemed to be a petition for winding up by the Court.

524.      Power of Court to appoint or remove liquidators.

            (1)        Where an order is made for a winding up subject to supervision, the Court may, by that or any subsequent order, appoint an additional liquidator or liquidators.

            (2)        The Court may remove any liquidator so appointed or any liquidator continued under the supervision order, and fill any vacancy occasioned by the removal, or by death or resignation.

            1[(3)      The Court may appoint the Official Liquidator as a liquidator under sub-section (1) or to fill any vacancy occasioned under sub-section (2).

            (4)        The  Court  may also appoint or remove a  liquidator  on  an application made by the Registrar in this behalf.]

525.      Powers and obligations of liquidator appointed by Court.

            A liquidator appointed by the Court under section 524 shall have the same powers, be subject to the same obligations, and in all respects stand in  the same position, as if he had been duly appointed a in accordance  with the provisions of this Act with respect to the appointment of liquidators in a voluntary winding up.

Effect of winding up on antecedent and other transactions

531.      Frudulent preference.

            (1)        Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being  wound  up, be deemed a fraudulent preference of its creditors  and  be  invalid accordingly:

                        Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months.

            (2)        For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual.

531A.    Avoidance of voluntary transfer.

            Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrance in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by or subject to the supervision of the Court or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator.

 532.     Transfer for benefit of all creditors to be void.

            Any transfer or assignment by a company of all its property to trustees for the benefit of all its creditors shall be void.

533.      Liabilities and rights of certain fraudulently preferred persons.

            (1)        Where. in the case of a company which is being wound up, anything  made, taken or done after the commencement of  this Act is invalid  under  section  531 as a fraudulent preference of a person interested  in property mortgaged or charged to secure the company's debt, then  (without prejudice to any rights or liabilities arising apart from this provision), the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken to  be personally liable as surety for the  debt,  to  the extent of the mort –

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1.   Ins. by Act 65 of 1960, s. 185.

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            (2)        The value of the said person's interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the mortgage or charge for the company's debt was then subject.

            (3)        On any application made to the Court with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Court shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as  in the case of a suit for the recovery of the sum paid.

                        This sub-section shall apply, with the necessary modifications, in relation to transactions other than the payment of money as it applies in relation to payments of money.

534.      Effect of floating charge.

            Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediately   preceding the commencement of the winding up, shall, unless it is proved  that  the company  immediately after the creation of the charge was solvent,  be invalid,  except to the amount of any cash paid to the company at  the time of, or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of  five per  cent. per annum or such other rate as may for the time  being  be notified  by  the Central Government in this behalf  in  the  Official Gazette:

            Provided  that  in relation to a charge created more  than three months  before the commencement of this Act, this section shall have effect  with the substitution, for references to twelve months of references to three months.

535.      Disclaimer of onerous property in case of a company which is being wound up.

            (1)        Where any part of the property of a company which is being wound up consists of –

                        (a)        land of any tenure,  burdened with onerous covenants;

                        (b)        shares or stock in companies;

                        (c)        any other property which is unsaleable or is not readily  saleable, by reason of its binding the possessor thereof either to the  performance of any onerous act or to the payment of any sum of money; or

                        (d)        unprofitable contracts;

                                    the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, or done anything in pursuance of the contract, may,  with the leave of the Court and  subject  to  the provisions  of  this section, by writing signed by him,  at  any  time within twelve months after the commencement of the winding up or  such extended period as may be allowed by the Court, disclaim the property:

                                    Provided  that,  where  any such property has  not  come  to  the knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming the property may be exercised at any time within twelve months after he has become aware thereof  or such extended period as may be allowed by the Court.

            (2)        The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the company, and the property of the company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the company and the property of the company from liability, affect the rights or liabilities of any other person.

            (3)        The Court, before or on granting leave to disclaim, may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and make such other order in the matter as the Court thinks just.

            (4)        The liquidator shall not be entitled to disclaim any property in any case where an application in writing has been made to him by any person interested in the property requiring him to decide whether he will or will not disclaim, and the liquidator has not, within a period of twenty-eight days after the receipt of the application or such extended period as may be allowed by the Court, given notice to the applicant that he intends to apply to the Court for leave to disclaim; and in case the property is a contract, if the liquidator, after such an application as aforesaid, does  not  within the  said period or extended period disclaim the contract, 1[he  shall be deemed to have adopted it.

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1.   Subs.  by Act 65 of 1960, s. 186, for "the  company  shall  be deemed to have adopted it".

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            (5)        The Court may, on the application of any person who is, as against  the  liquidator, entitled to the benefit or  subject  to  the burden of a contract made with the company, make an order  rescinding the contract  on such terms as to payment by or to  either  party of damages  for the non-performance of the contract, or otherwise as  the Court  thinks  just ; and any damages payable under the order to any such person may be proved by him as a debt in the winding up.

            (6)        The Court may, on an application by any person  who  either claims any interest in any disclaimed property or is under any liability not discharged by this Act in respect of any disclaimed property, and after hearing any such persons as it thinks fit, make an order for the vesting of the property in, or the delivery of the  property  to, any  person  entitled  thereto or to whom it may seem  just  that  the property should be delivered by way of compensation for such liability as  aforesaid,  or a trustee for him, and on such terms as  the Court thinks just; and on any such vesting order being made, the  property comprised  therein shall vest accordingly in the person therein named in that behalf without any conveyance or assignment for the purpose:

                        Provided  that, where the property disclaimed is of a lease-hold nature,  the Court shall not make a vesting order in favour of any person  claiming  under  the company, whether as under-lessee or as mortgagee  or holder of a charge by way of demise, except upon the terms of making that person –

                        (a)        subject to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property at the commencement of the winding up; or

                        (b)        if the Court  thinks fit, subject only to the same liabilities and obligations as if the lease had been assigned to that person at that date; and in either event (if the case so requires) as if the lease had comprised  only  the property comprised in the vesting order; and  any mortgagee or  under-lessee declining to accept a vesting  order upon such terms shall be excluded from all interest in and  security  upon the  property, and, if there is no person claiming under  the company who is willing to accept an order upon such terms, the Court shall have power  to vest the estate and interest of the  company  in  the property  in  any person liable, either personally or in a representative character, and either alone or jointly with the company, to perform the lessee's covenants in the lease, freed and discharged from all  estates, encumbrances and interests created  therein  by  the company.

            (7)        Any  person injured by the operation of a  disclaimer  under this  section shall be deemed to be a creditor of the company  to the amount  of the  compensation or damages payable  in  respect  of  the injury, and may accordingly prove the amount as a debt in the  winding up.

536.      Avoidance of transfers, etc., after commencement of winding up.

            (1)        In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void.

            (2)        In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void.

537.      Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court.

            (1)        Where any company is being wound up by or subject to the supervision of the Court –

                        (a)        any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or

                        (b)        any sale held, without leave of the Court, of any of the  properties or effects of the company after such  commencement; shall be void.

            1[(2)      Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government.]