The legal provisions and procedure relating to compulsory winding-up by Court will also apply in the case of winding-up of an unregistered company. In addition to that, the following provisions shall also be applicable:
(i) Contributories. In the event of an unregistered company being wound-up, everyn
shall be deemed to be a contributory, who is liable to pay, or contribute to the payment of
(a) any debt or liability of the company; or
(b) any sum for the adjustment of the rights of the members among themselves; or (c) the costs, charges and expenses of winding-up the company.
Every contributory shall be liable to contribute to the assets of the company all sums due from him in respect of any liability to payor contribute as aforesaid:
In the event of the death or insolvency of any contributory, the legal representative or official assignee of the contributory shall be liable [Section 585].
(ii) Stay of Proceedings. The same provisions as are applicable to stay of suit or legal proceedings against a ‘company’ at any time after the presentation of the petition and before making of the winding-up order, shall also apply to suits and proceedings against a contributory of the unregistered company, provided the application for stay is by a creditor [Section 586].
(iii) Suit or Proceedings. After an order has been made for winding-up of an unregistered company, no suit or proceedings can be proceeded with or commenced against the company without the leave of the Court [Section 587].
(iv) Direction of the Court as to Properties. If an unregistered company has no power to sue and be sued in a common name, the Court may by the winding-up order or by any subsequent order direct that all or any part of the property, movable or immovable, belonging to the company or held by trustees, shall vest in the Official Liquidator by his official name. Thereupon, the property or part thereof specified in the order shall vest in the Official Liquidator [Section 588].
The Official Liquidator may, after giving such indemnity as the Court may direct, bring or defend in his name any suit or legal proceeding relating to that property, or which it is necessary to bring or defend for the purpose of effectually winding-up the company and recovering its property [Section 588(2)].
(b) Meaning of a Defunct Company
A defunct company means a company which never commenced business or which is not carrying on business and has either no assets or has such assets as shall not be sufficient to meet the costs of liquidation. A company is, however, not considered defunct if the cessation of business is due to the conduct of winding-up [Re, Outlay Assurance Society”]. Also, the mere fact tl;1at the number of shareholders of a company are reduced below the statutory minimum does not render it defunct [Surjan Das Vs. Chaboa Cotton Co.”].
The policy which is followed with regard to weeding out the defunct companies is that where it appears from the latest available balance sheet of a defunct company that it has adequate realisable assets, steps are taken to take the company into compulsory liquidation. It is only where the latest available balance sheet shows that the company has no assets or has such assets as would not be sufficient to meet the costs of liquidation, steps are taken to strike their names off the register under Section 560t.
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