Kerala High Court: NCLT Lacks Power to Order Shareholder Statement in Winding Up Under Companies Act

Kerala High Court: NCLT Lacks Power to Order Shareholder Statement in Winding Up Under Companies Act

In a recent decision, the Kerala High Court determined that the National Company Law Tribunal's authority to direct a company to file its objections and statement of affairs is restricted to instances where the petition for winding up has been initiated by a party other than the company itself.

In his order, Justice C. Jayachandran drew upon Section 274(1) of the Companies Act, which outlines the procedures for filing statements of affairs.

In this case, the NCLT's Kochi Bench issued an order directing the petitioner to file a copy of the statement of affairs, contingent upon the payment of a ₹50,000 fee.

The petitioner lodged a formal challenge against the order, citing a specific provision of the 2013 Companies Act, Section 274(1). His argument centred around the section's limited scope, restricting such directives to the company and excluding non-company stakeholders like shareholders.

After carefully considering the relevant legal text, the Court found merit in the petitioner's contention and struck down the impugned directive, declaring it to be unlawful.

"The winding up proceedings will continue in accordance with law, directing the company to produce the statement of affairs, if it is found necessary to proceed with the matter," the Court observed while disposing of the case.