Companies Act • Official Statutory Text & Practice Guide
Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2013
Section 323 of Companies Act: Corporate Governance & Statutory Compliance
Official Bare Act Text
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All costs, charges and expenses properly incurred in the winding up, including the fee of the Company Liquidator, shall, subject to the rights of secured creditors, if any, be payable out of the assets of the company in priority to all other claims.
Statutory Defined Terms in this Section:(Click any term for official legal definition)
Section 323 of the Companies Act, 2013 established the absolute statutory super-priority of voluntary winding-up costs and liquidator remuneration over all other corporate claims; omitted by the IBC 2016, this super-priority is codified in Section 53(1)(a) of the IBC.
Absolute Super-Priority of Liquidation Costs: Mandated that all costs, charges, and expenses properly incurred in the voluntary winding up are payable out of company assets in paramount priority to all other claims.
Paramount First Charge of Liquidator Remuneration and Out-of-Pocket Disbursements: Liquidator's fees, legal expenses, auctioneer costs, and preservation charges constitute a first charge, taking precedence over general and unsecured creditors.
Ring-Fencing of Estate Realizations Against General Creditor Attachments: Statutorily protects the costs of administration from being diluted or depleted by pre-existing claims, ensuring orderly liquidation by solvent professionals.
Key Landmark Precedents:
Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar, (1973) 1 SCC 602: The Supreme Court recognized that costs and expenses incurred in liquidation must be met first from realized funds before any distribution to creditors.
Kotak Mahindra Bank Ltd. v. Hindustan National Glass & Industries Ltd., (2013) 7 SCC 369: The Supreme Court affirmed that liquidation costs take paramount precedence over both secured and unsecured creditor claims.
In re: Trent and Humber Ship Building Co., (1869) LR 8 Eq 112: The Chancery Division held that expenses properly incurred by liquidator in realization and preservation of assets are paid in full ahead of all other claims.
Courtroom Practice & Strategic Litigation Guidance:
In preparing liquidation accounts, liquidators must maintain distinct ledgers for liquidation expenses (legal fees, auctioneer charges, valuation fees, liquidator remuneration). Under Section 53(1)(a) IBC, these costs are deductible at source from gross realizations prior to any interim or final dividend distribution.
Legal Commentary & Landmark Judgments: Section 323
Section 323 of the Companies Act, 2013 established the absolute statutory super-priority of voluntary winding-up costs and liquidator remuneration over all other corporate claims; omitted by the IBC 2016, this super-priority is codified in Section 53(1)(a) of the IBC.
In preparing liquidation accounts, liquidators must maintain distinct ledgers for liquidation expenses (legal fees, auctioneer charges, valuation fees, liquidator remuneration). Under Section 53(1)(a) IBC, these costs are deductible at source from gross realizations prior to any interim or final dividend distribution.