Section 324 of Companies Act, 2013 – Debts of all descriptions to be admitted to proof

SECTION 324. DEBTS OF ALL DESCRIPTIONS TO BE ADMITTED TO PROOF

[Effective from 15th December, 2016]

In every winding up (subject, in the case of insolvent companies, to the application in accordance with the provisions of this Act or of the law of insolvency), all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency, or may sound only in damages, or for some other reason may not bear a certain value.

Applicable Rules

Companies (Winding Up) Rules, 2020

[Effective from 1st April, 2020]

Part III

WINDING UP BY TRIBUNAL (OTHER THAN SUMMARY WINDING UP) DEBTS AND CLAIMS AGAINST COMPANY

Rule 100. Notice for proving debts.—(1) Subject to the provisions of the Act and directions of the Tribunal, the Company Liquidator in a winding up by the Tribunal shall, within a period of thirty days from the date of order of winding up, fix a certain day, and give a notice of fourteen days thereof –

(i) by advertisement in Form No. WIN 43 in one issue of a daily newspaper in the English language and one issue of a daily newspaper in the regional language widely circulating in the State or Union territory where the registered office is situated concerned to the creditors of the company to prove their debts or claims and to establish any title they may have to priority under section 326 or327, or to be excluded from the benefit of any distribution made before such debts or claims are proved, or, as the case may be, from objecting to such distribution;

(ii) by such mode of communication as is permitted under section 20 to every person mentioned in the statement of affairs, as a creditor, who has not proved his debt and to every person mentioned in the statement of affairs as a preferential creditor, whose claim to be a preferential creditor has not been established or is not admitted, or where there is no statement of affairs, to the creditors as ascertained from the books of the company and, to each person who, to the knowledge of the Company Liquidator, claims to be a creditor or preferential creditor of the company and whose claim has not been admitted, to the last known address or place of residence of such person.

(2) All the rules hereinafter set out as to the admission or rejection of proofs shall apply with necessary variations to any claim to priority as a preferential creditor.

Rule 101. Proof of debt.—(1) In a winding up by the Tribunal, every creditor shall, subject as hereinafter provided, prove his debt, unless the Tribunal in any particular case directs that any creditors or class of creditors shall be admitted without proof.

(2) Formal proof of the debts mentioned in clause (d) of sub-section (1) of section 327 shall not be required, unless the Company Liquidator in any special case otherwise directs.

Rule 102. Mode of proof and verification thereof.—A debt may be proved by delivering or sending to the Company Liquidator by such mode as set out in section 20, an affidavit verifying the debt made by the creditor or by some person authorised by him and if the affidavit is made by a person authorised by the creditor, it shall state the authority and means of knowledge of the deponent and a creditor need not attend upon the examination unless required so to do by the Company Liquidator.

Rule 103. Contents of proof.—An affidavit proving a debt shall contain or refer to a statement of account showing the particulars of the debt, and shall specify the vouchers, if any, by which the same can be substantiated and the affidavit shall state whether the creditor is a secured creditor, or a preferential creditor, and if so, shall set out the particulars of the security or of the preferential claims, and the affidavit shall be in Form WIN 44.

Rule 104. Workmen’s dues.—In any case where there are numerous claims for wages or any accrued remuneration by workmen and others employed by the company, it shall be sufficient if one proof in Form WIN 45 for all such claims is made either by a foreman or some other person on behalf of all such creditors and such proof shall be annexed thereto as forming part thereof, setting forth the names of the workmen and others and the amounts severally due to them in the schedule in the said form, and any proof made in compliance with this rule shall have the same effect as if separate proofs had been made by each of the said workmen and others.

Rule 105. Production of bills of exchange and promissory notes.—Where a creditor seeks to prove in respect of a bill of exchange, promissory note or other negotiable instrument or security of a like nature on which the company is liable, such bill of exchange, note, instrument or security shall be produced before the Company Liquidator and be marked by him before the proof is admitted.

Rule 106. Value of debts.—The value of all debts and claims against the company shall, as far as is possible, be estimated according to the value thereof at the date of the appointment of the Provisional Liquidator or the order of the winding up of the company, whichever is earlier:

Provided that where before the presentation of the petition for winding up, a resolution has been passed by the company for winding up, the date for estimation of debts and claims shall be the date of the passing of such resolution.

Rule 107. Discount.—A creditor proving his debt shall deduct therefrom all trade discounts, if any.

Rule 108. Interest.—On any debt or certain sum payable at a certain time or otherwise, whereon interest is not reserved or agreed for, and which is overdue at the date of the winding up order, or the resolution, as the case may be, the creditor may prove for interest at a rate not exceeding six per cent. per annum or as decided by the Tribunal up to that date from the time when the debt or sum was payable, if the debt or sum is payable by virtue of a written instrument at a certain time, and if payable otherwise, then from the time when a demand in writing has been made, giving notice that interest will be claimed from the date of demand until the time of payment.

Rule 109. Periodical payments.—When any rent or other payment falls due at the time referred to in rule 108, and the order or resolution to wind up is made at any time other than one of those times mentioned in rule 108, the persons shall be entitled to the rent or payments for a proportionate part thereof up to the date of winding up order or resolution accrued due from day to day:

Provided that where the Company Liquidator remains in occupation of the premises demised to a company which is being wound up, nothing in this rule shall prejudice or affect the right of the landlord of such premises to claim payment by the company, or the liquidator, of rent during the period of the company’s or liquidator’s occupation.

Rule 110. Proof of debt payable at future time.—A creditor may prove for a debt not payable at the date of the winding up order, as if it were payable presently, and may receive dividends equally with the other creditors, deducting only thereat a rebate of interest at the rate of six per cent. per annum computed from the date of declaration of the dividend to the time when the debt would have become payable according to the terms on which it was contracted.

Rule 111. Examination of proof.—The Company Liquidator shall, as soon as possible but not later than thirty days or within such time as may be allowed by the Tribunal on an application by the liquidator, examine every proof of debt lodged with him and the grounds of the debt and he may call for the production of the documentary proof if any referred to in the affidavit of proof or require further evidence in support of the debt, and if he requires further evidence, or requires that the creditor should attend the investigation in person, he shall fix a day and time at which the creditor is required to attend or to produce further evidence and send a notice to such creditor in Form WIN 46 by pre-paid registered post or speed post so as to reach him not later than seven days before the date fixed.

Rule 112. Company Liquidator’s right to call any person in connection with investigation.—The Company Liquidator may call upon any person whom he may deem capable of giving information respecting the debts to be proved in liquidation and may require such person to produce any documents in his custody or power relating to such debts and shall tender with the call such sum as appears to the Company Liquidator sufficient to defray the traveling and other expenses of the person called for attendance and where the person so called fails without lawful excuse to attend or produce any documents in compliance with the call or avoids or evades service, the Company Liquidator may report the same to the Tribunal and apply for appropriate orders, and the Tribunal may pass any order as it may think fit

Rule 113. Affidavit.—For the purpose of his duties, in relation to the admission of proof of debts, where applicable, the Company Liquidator may take affidavits and the Company Liquidator may at his discretion dispense with this requirement and he may also permit the taking of an affidavit or undertaking in lieu of an oath.

Rule 114. Costs of proof.—Unless otherwise ordered by the Tribunal, a creditor shall bear the costs of proving his debt.

Rule 115. Acceptance or rejection of proof to be communicated.—As soon as possible, but not later than fourteen days, from the date of conclusion of the examination referred to in rule 111, the Company Liquidator shall, in writing admit or reject the proof in whole or in part, every decision of the liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the creditor concerned by means permitted under section 20 when the proof is accepted or rejected, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance and where the liquidator rejects a proof, wholly or in part, he shall state the grounds of the rejection to the creditor in Form WIN 47, and notice of admission of proof shall be in Form WIN 48.

Rule 116. Appeal by creditor.—(1) If a creditor is dissatisfied with the decision of the Company Liquidator in respect of his proof, the creditor may, not later than twenty-one days from the date of service of the notice upon him of the decision of the liquidator, appeal to the Tribunal against the decision.

(2) The appeal shall be made in Form WIN 49, supported by an affidavit which shall set out the grounds of such appeal, and notice of the appeal shall be given to the Company Liquidator and on such appeal, the Tribunal shall have all the powers of an appellate court under the Code of Civil Procedure, 1908 (5 of 1908).

Rule 117. Procedure where creditor appeals.—(1) The Company Liquidator shall, upon receiving notice of the appeal against a decision rejecting a proof wholly or in part, file with the Registry such proof with the order containing the grounds of rejection.

(2) It shall be open to any creditor or contributory to apply to the Tribunal for leave to intervene in the appeal, and the Tribunal may, if it thinks fit, grant the leave subject to such terms and conditions as may be just, and where such leave has been granted, notice of the hearing of the appeal shall be given to such creditor or contributory.

Rule 118. Company Liquidator not to be personally liable for costs.—The Company Liquidator shall in no case be personally liable for costs in relation to an appeal from his decision rejecting any proof wholly or in part.

Rule 119. Proofs and list of creditors to be filed in Tribunal.—The Company Liquidator shall, within thirty days from the date fixed for the submission of proofs under rule 100 or such further time as the Tribunal may allow, file in the Tribunal a list of the creditors, in Form WIN 50, who submitted to him proofs of their claims in pursuance of the advertisement and the notice referred to in rule 100, mentioning the amounts of debt for which they claimed to be creditors, distinguishing in such list the proofs admitted wholly, the proofs admitted or rejected in part, and the proofs wholly rejected, and the proofs, with the memorandum of admission or rejection of the same in whole or in part, as the case may be, endorsed thereon, shall be filed in Tribunal along with the certificate.

Rule 120. List of creditors not to be varied.—The list of creditors filed in Tribunal shall be the list of the creditors of the company, and shall not be added to or varied except under the order of the Tribunal and in accordance with such orders and where an order is made adding to or varying the list of creditors, the Company Liquidator shall amend the list in accordance with such order.

Rule 121. Notice of filing list and inspection of same.—Upon the filing of the list of creditors as settled by the Company Liquidator, the Registry shall notify the filing thereof on the Tribunal’s notice board and on the website of the Tribunal, and the list of creditors as settled and the proofs relating thereto shall be open to the inspection of every creditor or contributory on payment of fee of one thousand rupees.

Rule 122. Expunging of proof.—(1) If after the admission of a proof, the Company Liquidator has reason to believe that the proof has been improperly admitted or admitted by a mistake, he may immediately apply to the Tribunal upon notice to the creditor who made the proof, to expunge the proof or reduce its amount, as the case may be.

(2) Any creditor or contributory may, within ten days of the admission of the proof, also apply to the Tribunal to expunge the proof or reduce the amount thereof, if the Company Liquidator declines to move in the matter, and on such application, the Tribunal may pass such order as it may think just.

Rule 123. Procedure on failure to prove debt within time fixed.—If any creditor fails to file proof of his debt with the Company Liquidator within the time specified in the advertisement referred to in rule 100, such creditor may apply to the Tribunal for relief within fifteen days from the time specified in such advertisement, and the Tribunal may, thereupon, adjudicate upon the debt or direct the liquidator to do so.

Rule 124. Right of creditor who has not proved debt before declaration of dividend.—Any creditor who has not proved his debt before the declaration of any dividend or dividends shall be entitled to be paid out of any money for the time being in the hands of the Company Liquidator available for distribution of dividend, any dividend or dividends which such creditor may have failed to receive before that money is applied to the payment of any future dividend or dividends, but he shall not be entitled to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein.

Rule 125. Payment of subsequent interest.—In the event of there being a surplus after payment in full of all the claims admitted to proof, creditors whose proofs have been admitted shall be paid interest from the date of the winding up order or of the resolution, as the case may be, up to the date of the declaration of the final dividend, at a rate not exceeding six per cent. per annum or such other rate as may be decided by the Tribunal, on the admitted amount of the claim, after adjusting against the said amount the dividends declared as on the date of the declaration of each dividend.