An Exploratory Study on Compulsory Liquidation of a Company and its Liability

Abstract

This research paper delves into the intricacies of company liquidation, focusing on the winding-up process as an essential legal mechanism to terminate a corporation's existence. The study addresses the objectives of understanding the causes of liquidation, the liabilities of companies during liquidation, and the powers of courts and tribunals in the process. The research scope primarily centers on India's legal framework, encompassing the Companies Act of 2013 and the Insolvency and Bankruptcy Code of 2016. The paper finds that while insolvency is often perceived as the primary reason for liquidation, other factors contribute to the decision. Compulsory winding-up procedures are aimed at permanently closing businesses that are no longer viable, relieving directors of unmanageable debts, and preventing improper trade practices. The research highlights the roles of different adjudicating authorities and examines the differences between voluntary and compulsory winding-up modes. The study draws from existing literature and empirical research to substantiate its findings. The authors compare provisions under the Companies Act and the Insolvency and Bankruptcy Code to showcase the evolution of winding-up regulations. They emphasize the importance of efficient liquidation procedures to address India's bad debt issues. In conclusion, the paper underscores that while insolvency is a significant factor, other circumstances lead to company liquidation. The legal reforms introduced by the Insolvency and Bankruptcy Code have streamlined and expedited the winding-up process, ultimately aiming to facilitate the resolution of bad debts and improve the overall economic landscape. The authors suggest more prudent enforcement of penalties, the preference for voluntary winding-up when suitable, and continued emphasis on the efficiency of the new legal framework.