Back
NCLT Chennai Allows Winding Up of Struck-Off Company to Realise Assets, Settle Liabilities
In a significant ruling that reaffirms the resilience of corporate insolvency mechanisms, the , has held that a company struck off from the Register of Companies can still be wound up to realise its assets and settle outstanding liabilities. The decision, delivered by a comprising Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam, underscores the continuing jurisdiction of the Tribunal even after a company’s name has been removed from the statutory register.
The petition was filed by Sujatha Venkateswaran, a shareholder and contributory of , which was struck off by the on . The company had ceased active operations years earlier, following the death of its promoter-director, G. Venkateswaran, on . His demise created what the petitioner described as a “sudden and profound vacuum” in management, making it impossible for the remaining directors to complete statutory filings. Despite being struck off, the company continued to hold investments in equity shares of various listed companies, both in physical and dematerialised form. Records traced by the petitioner showed that several of these investments remained in the company’s name.
The tribunal observed that “to ensure that the marketable securities are realized and the liabilities of the Company are settled, it is that the Company be wound up under the enactment of the and Rules made thereunder.” This reasoning formed the bedrock of the order admitting the winding-up petition and appointing as the provisional liquidator.
The Legal Framework: Sections 248(8), 271(e), and 272(1)(b)
The petition invoked three key provisions of the . (8) was pivotal. It states unequivocally that “Nothing in this section shall affect the power of the Tribunal to wind up a company” whose name has been struck off from the register. This provision ensures that striking off does not act as a shield against winding-up proceedings, especially where assets and liabilities remain unresolved.
empowers the Tribunal to order winding up if it is “” to do so. The tribunal found that the continued existence of marketable securities and outstanding liabilities — including ₹20.44 lakh payable to shareholders as unsecured loans — made it to wind up the company. The petitioner held 23.61% of the paid-up share capital in her individual capacity and claimed an additional 71.05% as the legal heir of the late G. Venkateswaran. The tribunal noted that she was the company’s only unsecured creditor.
permits a contributory to present a winding-up petition. The tribunal clarified that this right exists even where the company has no assets or no surplus assets remaining after satisfying liabilities. In the present case, the company did have assets — listed stocks and marketable securities — but their value could not be realised without a formal winding-up process.
Background: A Company in Administrative Limbo
was originally incorporated with an authorised share capital of ₹2 crore, and its issued, subscribed, and paid-up share capital stood at ₹24.35 lakh. The company’s old provisional financial records indicated that ₹20.44 lakh was payable to shareholders as unsecured loans. However, after the promoter’s death, the company fell into a state of administrative paralysis. No statutory filings were made, and the company was eventually struck off by the RoC under of the .
Despite being struck off, the company’s investment portfolio — consisting of equity shares in multiple listed companies — remained intact. The petitioner, acting in her capacity as a shareholder and legal heir, sought to unlock this value to settle the outstanding liabilities. The tribunal found that the only viable path was to initiate winding-up proceedings, as the company lacked a functioning board and could not voluntarily realise its assets.
The Tribunal’s Reasoning: Winding Up
The applied a pragmatic approach. It recognised that while the company was defunct for all practical purposes, its asset base still held value. The striking off had not extinguished the company’s legal personality entirely; it simply removed it from the register. The tribunal emphasised that (8) explicitly preserves its power to wind up such companies. The “” ground under was particularly apt here, as the company’s inability to manage its own affairs meant that a formal liquidation was necessary to protect the interests of creditors and shareholders.
The tribunal also took note of the petitioner’s status as both a contributory and the only unsecured creditor. This dual capacity strengthened the case for winding up, as there was no other stakeholder opposing the petition. The provisional liquidator was directed to take charge of the company’s property and effects, and the petitioner was ordered to pay ₹2 lakh towards the expenses of the winding-up proceedings, with the amount to be adjusted against assets recovered and distributed.
Implications for Legal Practice and Corporate Governance
This ruling carries significant implications for legal practitioners and corporate stakeholders. It clarifies that the striking off of a company under does not create a jurisdictional bar against winding up. For shareholders and creditors of struck-off companies that still hold assets, this decision provides a clear remedy: they can approach the NCLT for winding up to realise those assets and settle liabilities.
The judgment also reinforces the principle that the “” ground is a flexible tool that can be invoked even in cases of administrative dormancy. It may encourage more petitions from contributories of struck-off companies that have residual assets, particularly in the context of investment holding companies with portfolios of listed securities.
For insolvency professionals, the appointment of a provisional liquidator in such cases opens up a pathway for asset realisation and distribution that might otherwise be inaccessible. The order also sets a precedent for how courts can deal with companies that are neither active nor formally dissolved but still possess economic value.
Conclusion
The NCLT Chennai’s decision in the matter of serves as a crucial reminder that the corporate death of a company — through striking off — is not absolute. The Tribunal retains the power to resurrect the winding-up process to achieve justice and equity. By allowing the petition, the has ensured that marketable securities can be converted into cash and that the company’s liabilities, including unsecured loans to shareholders, can be settled. This ruling will likely be cited in future cases involving struck-off companies with stranded assets, providing a clear legal framework for their eventual liquidation.
