Effect of winding up order
Section 278 of the Companies Act, 2013 deals with effect of winding up order. The order for the winding up of a company shall operate in favour of all the creditors and all contributories of the company as if it had been made out on the joint petition of creditors and contributories. The Act came into force on 01 Apr 2014.
The order for the winding up of a company shall operate in favour of all the creditors and all contributories of the company as if it had been made out on the joint petition of creditors and contributories.
Section 278, The Companies Act, 2013 (Act 18 of 2013).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Kaledonia Jute and Fibres Pvt. LTD vs Axis Nirman and Industries LTD, Girdhar Trading CO, Official Liquidator up Allahabad
Court's Decision & Legal Precedent
Setting out Section 278 of the 2013 Act alongside its predecessor Section 447 of the 1956 Act in a tabular comparison, the Court held that a winding-up order made on the petition of a single creditor or contributory is in law treated as an order made on the joint petition of all creditors and all contributories, so that the order operates in favour of every one of them and not merely the petitioning creditor.
On this section: It reads Section 278 as the source of the rule that every creditor and contributory is treated as a party to the winding up, and uses that construction to decide who may move in the winding-up proceedings.
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Action Ispat and Power Pvt. LTD vs Shyam Metalics and Energy Limited
Court's Decision & Legal Precedent
Even post-admission of a winding up petition and after appointment of a Company Liquidator to take over assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to the NCLT. Such discretion should be exercised based on whether irreversible steps have been taken in the winding up proceedings. If no actual sales of immovable or movable properties have taken place and the proceedings have not reached a stage making it impossible to set the clock back, the Company Court should transfer the proceedings to NCLT to be dealt with as an application for initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code 2016, in accordance with the legislative intent to prioritize corporate revival over liquidation.
On this section: Effect of winding up order operates in favour of all creditors and contributories as if made on joint petition
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… The vexed question before the Court was whether the expression "any person could apply for transfer …" contained in paragraph 17 of the judgment of this Court in Forech (supra) would refer to persons who are not parties to the proceeding. This Court, after setting out section 278 of the Companies Act, 2013, then held: " 44. Thus, the proceedings for winding up of a company are actually proceedings in rem to which the entire body of creditors is a party. The proceeding might have been initiated by one or more creditors, but by a deeming fiction the petition is treated as a joint …
Questions about Section 278
What have the courts held on Section 278 of the Companies Act?
Kaledonia Jute and Fibres Pvt. LTD vs Axis Nirman and Industries LTD, Girdhar Trading CO, Official Liquidator up Allahabad (19 Nov 2020) is the leading judgment on this section among those set out below: It reads Section 278 as the source of the rule that every creditor and contributory is treated as a party to the winding up, and uses that construction to decide who may move in the winding-up proceedings. Another 1 judgment on this section is set out below, all of them from the Supreme Court.
How do I find court cases under Section 278 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 278, section 278 Companies Act, section 278 of the Companies Act. People searching for it also type 278 companies act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Kaledonia Jute and Fibres Pvt. LTD vs Axis Nirman and Industries LTD, Girdhar Trading CO, Official Liquidator up Allahabad (19 Nov 2020).
When did Section 278 of the Companies Act come into force?
Section 278 of the Companies Act, cited as Companies Act 278, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 16 Oct 2026. This page is not a substitute for legal advice.