WTC Ltd had been incurring losses since inception and was decided to wind up. The company had several pending litigation and that claim against the company exceeded value of its assets and, thus, debt due to creditors co

Voluntary Liquidation of Corporate Persons Section 59(3) of the Insolvency and Bankruptcy Code, 2016 provides that voluntary liquidation proceedings of a corporate person registered as a company shall meet the following conditions: A declaration from majority of the directors of the company verified by an affidavit stating that (i) they have made a full inquiry into the affairs of the company and they have formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and (ii) the company is not being liquidated to defraud any person; The declaration under sub-clause (a) shall be accompanied with the following documents: (i) audited financial statements and record of business operations of the company for the previous two years or for the period since its incorporation, whichever is later; (ii) a report of the valuation of the assets of the company, if any prepared by a registered valuer; Within four weeks of a declaration under sub-clause (a), there shall be - (i) a special resolution of the members of the company in a general meeting requiring the company to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator; or (ii) a resolution of the members of the company in a general meeting requiring the company to be liquidated voluntarily as a result of expiry of the period of its duration, if any, fixed by its articles or on the occurrence of any event in respect of which the articles provide that the company shall be dissolved, as the case may be and appointing an insolvency professional to act as the liquidator. The proviso appended to sub-section (3) of section 59 lays down that if the company owes any debt to any person, creditors representing two thirds in value of the debt of the company shall approve the resolution passed under sub-clause (c) within seven days of such resolution. Thus, as per section 59(3) voluntary liquidation could only be undertaken if corporate debtor discharged its debts to satisfaction of creditors and if there was no litigation pending against corporate debtor. In the instant case since both these ingredients are not satisfied, hence the option for voluntary liquidation of the company could not be advised.