Companies Act • Official Statutory Text & Practice Guide
Statutory Regulation
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Act 2013
Section 373 of Companies Act: Corporate Governance & Statutory Compliance
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Where an order has been made for winding up, or a provisional liquidator has been appointed for, a company registered in pursuance of this Part, no suit or other legal proceeding shall be proceeded with or commenced against the company or any contributory of the company in respect of any debt of the company, except by leave of the Tribunal and except on such terms as the Tribunal may impose.
Statutory Defined Terms in this Section:(Click any term for official legal definition)
Section 373 of the Companies Act, 2013 imposes an automatic statutory stay on all legal proceedings against a converted company or any contributory once a winding-up order is made, requiring express leave of the Tribunal to commence or continue actions.
Automatic Statutory Stay: Upon the making of a winding-up order or the appointment of a provisional liquidator, no suit or other legal proceeding shall be commenced or proceeded with against the company.
Extension to Contributories: The statutory stay extends to any suit or legal proceeding against any contributory of the company in respect of any corporate debt.
Mandatory Tribunal Leave: No proceeding may be maintained except with the express leave of the Tribunal and subject to such terms, conditions, and undertakings as the Tribunal may impose.
Key Landmark Precedents:
Bansidhar Shankarlal v. Mohd. Ibrahim, (1970) 3 SCC 700: The Supreme Court held that obtaining leave of the court under statutory winding-up stay provisions is mandatory; proceedings initiated or pursued without leave are defective and vulnerable to being stayed.
S.V. Kandeakar v. V.M. Deshpande, (1972) 1 SCC 438: The Supreme Court held that the purpose of statutory stay provisions is to ensure that all claims against the company and its contributories are investigated and adjudicated under the unified control of the liquidation forum.
Central Bank of India v. Elmot Engineering Co. (P) Ltd., (1994) 4 SCC 159: The Supreme Court affirmed that the statutory bar on unpermitted litigation prevents multiple conflicting decrees and preserves the collective liquidation fund.
Courtroom Practice & Strategic Litigation Guidance:
Before pursuing a civil suit or execution proceeding against a partner or contributory of a converted company in liquidation, file a formal application for leave under Section 373 before the NCLT. Establish that the claim involves independent personal obligations or rights that cannot be effectively adjudicated in the winding-up forum.
Legal Commentary & Landmark Judgments: Section 373
Section 373 of the Companies Act, 2013 imposes an automatic statutory stay on all legal proceedings against a converted company or any contributory once a winding-up order is made, requiring express leave of the Tribunal to commence or continue actions.
Before pursuing a civil suit or execution proceeding against a partner or contributory of a converted company in liquidation, file a formal application for leave under Section 373 before the NCLT. Establish that the claim involves independent personal obligations or rights that cannot be effectively adjudicated in the winding-up forum.