Section 287: Advisory Committee

This article explains the concept of advisory committee, its composition and function during the winding up of the company under section 287 of the companies act, 2013.
Estimated Reading Time: 3 minutes

Introduction

Section 287 of Companies Act, 2013, is part of chapter XX- Part I and lays down the provision for the advisory committee, its composition and functions during winding up of a company under companies act 2013. This committee ensures that all the interested parties to the liquidation proceeding are informed and that the tribunal is also informed about the status of the procedure as handled by the company liquidator. This analysis will give a brief outline of what this section puts forth.

Purpose of Section 287

This comes into play during the winding up procedure of a company and briefly lay down the following:

  • This section entails the formation of an advisory committee in accompaniment, going under liquidation. The purpose of this committee is to advise the liquidator on necessary matters and to report to the tribunal on matter that it may direct.
  • The advisory committee that is formed by tribunal for a company under liquidation should consist of not more than 12 members of whom there should be creditors or contributories, or other persons as directed by tribunal, who can become members of the committee.
  • The company liquidator is responsible under this section to convene a meeting of the creditors and contributories to make decisions on the composition of the advisory committee. The advisory committee will under this section, have a right to inspect the books of account and other documents, assets and properties of the company under liquidation at a reasonable time according to this section.
  • The procedure that needs to be followed for convening a meeting under this section and other matters relating to conduct of business by the advisory committee must be such as may be prescribed later.
  • The chair of the meeting under this section will be the company liquidator.

Situation Before Enactment of Section 287

This section corresponds to section 464 (Appointment and composition of committee of inspection) and section 465 (Constitution and proceedings of committee of inspection) of the 1956 Act. The term ‘advisory committee’ referred to in the present section was termed as ‘committee of inspection’ under the 1956 Act. The old act, 1956 had more procedure with respect to working of committee given in the act itself, but the new act does not lay down the procedure in the act itself but states it will be as prescribed, leaving ambiguity. The provision in the new act is not as detailed as was in the 1956 act.

Application of Section 287

This comes into application when a company is going under winding up under the act, 2013. This is done to make sure that the court and the creditors and contributories all have information and are in loop with respect to the procedure and status of the winding up of the company. Through this committee the court can keep a watch on the winding up process of a company. 

Cases at a Glance

Following cases are important for this section:

  • In Re: Janata Works Pvt. Ltd. (In Liquidation) [1]: In this case the court briefly discusses this section and emphasizes the proper process to be followed for the constitution of inspection committee. It is through the committee of inspection that the body of creditors has a right of audience in matters in respect of a company in liquidation. There is no committee of inspection appointed in this case and there is no proper application before the Court for appointment of the committee of inspection. If an appointment of the committee of inspection is to be made, Section 464 read with Rules 140 and 141 of the Companies (Court) Rules, 1959 provides for the procedure to be followed for appointment of committee of inspection. If the committee is not validly constituted, then creditors have no right they can derive from the committee.

Concluding Summary

This section lays down the provision for constitution of an advisory committee. This committee makes sure that the interest of all the stakeholders during the liquidation process is protected and that tribunal is informed about all the important aspects as prescribed. This committee makes sure that the liquidation process of a company under the act, 2013 concludes smoothly.


[1] In Re: Janata Works Pvt. Ltd. (In Liquidation) (1982) 84 BOMLR 587.

Also read, Doctrine of Ultra Vires under Company Law: applicability, purpose, interpretation.

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