Companies Act • Official Statutory Text & Practice Guide
Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2013
Section 298 of Companies Act: Corporate Governance & Statutory Compliance
Official Bare Act Text
Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary
The Tribunal may, in the event of the assets of a company being insufficient to satisfy its liabilities, make an order for the payment out of the assets, of the costs, and expenses incurred in the winding up, in such order of priority inter se as the Tribunal thinks just and proper.
Statutory Defined Terms in this Section:(Click any term for official legal definition)
Section 298 of the Companies Act, 2013 empowers the Tribunal, in the event of company assets being insufficient to satisfy liabilities, to make orders for the payment of winding-up costs, charges, and expenses out of assets in such priority inter se as it considers just.
Discretionary Power in Deficient Estates: The Tribunal possesses statutory discretion to determine the payment and allocation of liquidation costs, charges, and expenses when corporate assets are insufficient to satisfy total liabilities.
Equitable Inter Se Priority: The Tribunal is empowered to order the payment of winding-up expenses out of the assets of the company in such order of priority inter se as the Tribunal considers equitable and just.
First Charge of Liquidation Preservation: Operational and legal expenses legitimately incurred by the liquidator in preserving, recovering, and realizing corporate property rank in priority over general unsecured debts.
Key Landmark Precedents:
Re: London Metallurgical Co., [1895] 1 Ch 758: The court held that where the liquidation fund is inadequate to pay all expenses and debts, the court has unfettered equitable discretion under company law to determine the order of priority among various categories of winding-up costs.
Official Liquidator v. Central Bank of India, (1983) 54 Comp Cas 351 (Bom): The Bombay High Court held that the expenses incurred by the official liquidator in preserving and safeguarding company assets constitute a paramount first charge upon the proceeds of sale under Section 476 (now Section 298).
Courtroom Practice & Strategic Litigation Guidance:
When a company in liquidation holds distressed or encumbered assets yielding proceeds insufficient to discharge both administration costs and secured debts, the liquidator must file an application under Section 298. Pleading must detail watch and ward, insurance, and realization costs incurred to preserve the property, securing a prior deduction before secured creditor distribution.
Legal Commentary & Landmark Judgments: Section 298
Section 298 of the Companies Act, 2013 empowers the Tribunal, in the event of company assets being insufficient to satisfy liabilities, to make orders for the payment of winding-up costs, charges, and expenses out of assets in such priority inter se as it considers just.
When a company in liquidation holds distressed or encumbered assets yielding proceeds insufficient to discharge both administration costs and secured debts, the liquidator must file an application under Section 298. Pleading must detail watch and ward, insurance, and realization costs incurred to preserve the property, securing a prior deduction before secured creditor distribution.