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SECTION 231: POWER OF TRIBUNAL TO ENFORCE COMPROMISE AND ARRANGEMENT

Updated: May 11


INTRODUCTION

Section 231 of The Companies Act, 2013 talks about the powers of NCLT to enforce the order of Compromise and Arrangement. This provision is an ancillary order of Section 230 of The Companies Act, 2013.


SECTION 231

This provision states that if the tribunal has allowed compromise or arrangement to a company, then they have the power to supervise the implementation of the said compromise or arrangement order, can give further directions, and if the tribunal believes that it can not implement the terms of the order then it can order the winding up of the company.


POWERS OF TRIBUNAL

Before discussing the powers of the tribunal, we must understand why the sanction of the tribunal is important.

  1. Once the order or sanction is approved by the tribunal, the company has to abide by the order, otherwise, there will be legal repercussions.

  2. If the tribunal won't have interfered, the majority of the company might subdue the right of the minority. So to ensure the just representation of the minority, the tribunal has to interfere.

  3. Tribunal has supervisory power meaning NCLT can modify the order if it is of the view that the order is not in the interest of the members and even can order winding up of the company.

NCLT has the sole power to either approve or reject the order/ scheme of compromise or arrangement according to Section 230 of The Companies Act 2013. After approving the scheme/ order of compromise or arrangement, NCLT has powers to-

  • Supervise or monitor the implementation of the order.

  • Modify or amend the scheme or give directions to achieve better results

  • Order winding up of the company if the company is not able to pay its debt or if NCLT believes that the order is not serving well or working out for the members of the company.

DUTIES OF THE TRIBUNAL

With powers come certain duties. The tribunal also has duties to comply with apart from the powers mentioned above.

  1. The tribunal has to ensure that the scheme/ order must be within the provisions of the Companies Act, 2013.

  2. The tribunal must ensure that minorities or the people adversely affected by the scheme/ order are fairly represented in the meeting and at the time of the voting process.

  3. The tribunal needs to ensure that the order doesn't have any adverse effect on society.

  4. The scheme/ order must be reasonable.

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