IBC Section 255: Amendments of Act 18 of 2013

Section 255 of Insolvency and Bankruptcy Code, 2016: Amendments of Act 18 of 2013

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

The Companies Act, 2013 shall be amended in the manner specified in the Eleventh Schedule.

Legal Commentary & Landmark Judgments: Section 255

Section 255 amends the Companies Act, 2013 to transfer winding-up on grounds of inability to pay debts exclusively to the Code and align corporate restructuring provisions.

Comprehensive Companies Act Harmonization: Amends Act 18 of 2013 in the manner specified in the Eleventh Schedule to the Code.
Ouster of Winding Up for Inability to Pay: Deletes Section 271(1)(a) of the Companies Act, 2013; corporate insolvency and inability to pay debts can now only be pursued under the Code, not via company petitions.
Interplay with Section 230 Schemes: Harmonizes corporate compromise schemes under Section 230 of the Companies Act with liquidation and restructuring under the Code.

Key Landmark Precedents:

Forech India Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. (2019) 18 SCC 549: The Supreme Court delivered a landmark ruling on Section 255 and the Eleventh Schedule, holding that winding-up petitions on grounds of inability to pay debts pending before High Courts can be transferred to NCLT to be treated as IBC applications.
Arun Kumar Jagatramka v. Jindal Steel and Power Ltd. (2021) 7 SCC 474: Held that Section 29A disqualifications apply equally to compromise schemes under Section 230 of the Companies Act for companies undergoing liquidation under the Code.

Courtroom Practice & Strategic Litigation Guidance:

Litigants cannot file winding-up petitions before High Courts on grounds of commercial insolvency; any debt-default enforcement against an incorporated company must be instituted before the NCLT under Section 7 or Section 9 of the Code.