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Section 279: Stay of suits, etc., on winding up order

Companies Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Act 2013
Section 278 All 470 Sections of Companies Act Section 280
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 279

Section 279 of the Companies Act, 2013 imposes an automatic statutory stay on the commencement or continuation of any suit or legal proceeding by or against the company upon the passing of a winding up order or appointment of a provisional liquidator, save with the express leave of the Tribunal.

  • Mandatory Leave of Tribunal: No suit or other legal proceeding may be commenced, or if pending at the date of the winding-up order or appointment of provisional liquidator, proceeded with by or against the company without express leave of the NCLT.
  • Sixty-Day Adjudication Mandate: Applications seeking leave to institute or proceed with legal actions against the company must be disposed of by the Tribunal within a statutory timeframe of sixty days.
  • Exemption for Constitutional Appeals: The statutory requirement of obtaining Tribunal leave does not apply to any proceeding pending in appeal before the Supreme Court of India or the High Court.
Key Landmark Precedents:
  • Central Bank of India v. Elmot Engineering Co., (1994) 4 SCC 459: The Supreme Court held that the primary objective of staying suits is to prevent the liquidation estate from being wasted in protracted litigation and to ensure that all claims are evaluated in a single centralized forum.
  • Industrial Credit and Investment Corporation of India Ltd. v. Srinivas Agencies, (1996) 4 SCC 165: The Supreme Court ruled that while secured creditors stand outside winding up, they must apply for leave under Section 446 (now Section 279), which the court grants or conditions to protect the interests of workmen and general creditors.
Courtroom Practice & Strategic Litigation Guidance:

Litigants having pending arbitrations or civil suits against a wound-up company must file an application under Section 279(1) for grant of leave before the NCLT before taking any substantive step in the suit. Proceeding without leave renders all subsequent decree orders voidable and contemptuous vis-a-vis the liquidation court.

Section 278 All 470 Sections of Companies Act Section 280