‘Companies Act must stipulate time limit for liquidation of firms’

 

Order for winding up of a company is not the end in itself. It has to be dissolved. Many people are not in the know of this, said Justice V. Ramasubramanian, Judge, Madras High Court.

Inaugurating a conference on Companies Act 2013: Ushering in New Era of Corporate Regulation organised by the Associated Chambers of Commerce and Industry in association with the Indian Chamber of Commerce and Industry, Coimbatore and Indian Institute of Corporate Affairs, he said, “the law does not provide a framework or time limit for liquidation of companies. But, when I held the Companies jurisdiction portfolio, I could, with little initiative dissolve 167 companies that had been wound up about 10-50 years before. One company that I had ordered for dissolution was wound up in 1952. Since then, the files of this company were only gathering dust in the cupboards of the Office of the Official Liquidator. By issuing an order for dissolution of the 167 companies in the 10 months that I had been holding that portfolio, we were able to distribute dividends to the tune of Rs 167 crore and set a record.”

Justice Ramasubramanian was responding to the former Chief Election Commissioner T.S. Krishnamurthy’s observation on the need for setting a time limit for liquidation of companies in the Companies Act.

Krishnamurthy noted that Singapore had set the time limit for liquidation of companies at one year. “When the law does not provide a time limit, companies languish for decades,” he pointed out.

While admitting that the former Chief Election Commissioner is right in his observation, Justice Ramasubramanian said, “after the company is wound up, it takes a lot of time to get the company dissolved. But many are not aware that after the provisional and final winding up, the company has to be dissolved without any trace. The dissolution might take time, but winding up of a company is not the end,” he said.

Reverting to the various enactments, the Madras High Court Judge said every enactment in this country is a relic of the colonial past, without exception. And, no enactment resolves any problem fully and finally, as man knows the technique of breaking every law.”

Urging the audience to be more ethical and law abiding, he said, “there can be no greater corporate social responsibility than adherence to value system.’