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Section 354: Meetings to ascertain wishes of creditors or contributories

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Statutory Regulation
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Act 2013
Section 353 All 470 Sections of Companies Act Section 355
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 354

Section 354 of the Companies Act, 2013 empowers the Tribunal during corporate winding up to ascertain and have regard to the proven wishes of creditors and contributories, authorizing the convening of stakeholder meetings and the appointment of an independent meeting chairman.

  • Tribunal's Discretionary Regard: In all matters relating to the winding up of a company, the Tribunal may have regard to the wishes of creditors or contributories as proved to it by sufficient evidence, balancing collective commercial wisdom against individual minority claims.
  • Judicial Direction to Convene Meetings: The Tribunal may direct meetings of creditors or contributories to be called, held, and conducted in such manner as it thinks fit, and appoint an independent person as chairman to report the proceedings and voting outcomes directly to the bench.
  • Differential Voting Weightage: When ascertaining stakeholder wishes, regard is strictly had to the monetary value of each creditor's debt in creditor meetings, and to the number of votes conferrable by each contributory under the company's articles or statutory provisions in contributory meetings.
Key Landmark Precedents:
  • Madhusudan Gordhandas & Co. v. Madhu Woollen Mills (P) Ltd., (1971) 3 SCC 632: The Supreme Court held that where a company's debt is disputed on bona fide grounds and an overwhelming majority of creditors oppose winding up in good faith, the court will respect their commercial wishes under the statutory equivalent of Section 354.
  • Action Ispat and Power Ltd. v. Shyam Metalics and Energy Ltd., (2021) 2 SCC 641: The Supreme Court affirmed that the collective will of the financial and operational creditors remains paramount in determining whether an entity should undergo liquidation or corporate rescue.
  • Re Western of Canada Oil, Lands and Works Co., (1873) LR 17 Eq 1: Established the classic company law doctrine that the court exercises plenary discretion to ascertain the wishes of creditors and contributories, refusing winding-up where the collective constituency seeks commercial survival.
Courtroom Practice & Strategic Litigation Guidance:

When resisting or prosecuting a winding-up petition, file an interlocutory application under Section 354 with certified affidavits from creditors representing the majority in value of aggregate corporate debt. Demonstrate that the opposing creditors possess genuine commercial reasons, as the Tribunal will not permit a solitary or minority creditor to force liquidation over the objection of an overwhelming debt majority.

Section 353 All 470 Sections of Companies Act Section 355