12.18.8 (Voluntary Winding up Under Supervision of the Court)

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 should continue subject to the supervision of the court (s.522). Application for such supervision order may be made either by a creditor, a contributory, the company, or the liquidator.

"One advantage of having a supervision order is that the liquidator is allowed to occupy the same position and exercise the same power (subject to restrictions where necessary) as a voluntary liquidator. At the same time the advantage of a compulsory winding up as regards stay of suits and other proceedings and making and enforcing calls etc., are also secured and the court is empowered to exercise all the powers which it can exercise in a compulsory winding up.... In truth, a supervision order is an amalgam of both - a voluntary winding up and a winding up by court as it is made on such terms and conditions as the court thinks just" (Aaadh Beharil, in N. Rajaraman v. Hindustan Brown Boveri Ltd. XI - ASIL 1975,224).

Such an order is passed by the court under the following circumstances: (i) The resolution for winding up was obtained by fraud; or (ii) The rules relating to winding up order are not being observed; or (iii) The liquidator is prejudicial or is negligent in collecting the assets.

The court, in such a case, gets the same powers as it has in the case of compulsory winding up under order of the court. The court may also appoint an additional liquidator or liquidators. It may also remove any liquidator and fill any vacancy occasioned by the removal or by death or by resignation (s.524). A liquidator so appointed 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 appointed in accordance with the provisions of the Act relating to the appointment of liquidator in voluntary winding up, subject, however, to any restrictions the court may impose (s.525).

Unless the court imposes restrictions on the exercise of any powers by the liquidator, he will have all the powers conferred on a liquidator in voluntary winding up [s.526(1)]. The court will have as wide powers as in compulsory winding up. The court may stay suits or legal proceedings. It can make or enforce calls and all other orders necessary for beneficial winding up of the company [s.526(2)].

Powers of court to order compulsory winding up (s.527). The court may pass an order for compulsory winding up superseding the order of winding up under its supervision. The court may then appoint a person who is the liquidator either provisionally or permanently to be liquidator in winding up by the court in addition to and subject to the control of Official Liquidator.

Dissolution of company. In the case of winding up under the supervision of the court, the company is deemed to be dissolved from the date the order of the court is issued to that effect. The court will issue such an order when the affairs of the company have been completely wound up and the liquidator has made an application to the court requesting it to order for the dissolution of the company. Where a company has been dissolved according to the due process of law, (except under s.560 – defunct companies) on the expiry of 5 years from the date of dissolution of the company, the name of the company should be struck off the Register after nothing against its name that it has been dissolved.