Section 279 of CA 2013 : Section 279: Stay Of Suits, Etc, On Winding Up Order

Explanation using Example

Imagine a company, "Tech Innovations Ltd.," is undergoing a winding-up process due to insolvency. During this time, a software vendor, "Soft Solutions," realizes that "Tech Innovations Ltd." has unpaid invoices for services rendered. "Soft Solutions" intends to file a lawsuit to recover the debt. However, under Section 279(1) of The Companies Act, 2013, "Soft Solutions" cannot initiate legal proceedings against "Tech Innovations Ltd." without obtaining permission from the Tribunal.

"Soft Solutions" applies to the Tribunal for leave to commence legal action. The Tribunal must decide on this application within sixty days. If the Tribunal grants permission, it may impose certain terms, such as limiting the claim amount or dictating the manner in which the suit proceeds.

Meanwhile, "Tech Innovations Ltd." had appealed a separate legal matter to the High Court before the winding-up order was passed. According to Section 279(2), the appeal in the High Court can continue without requiring the Tribunal's leave, as this subsection exempts proceedings pending in appeal before the Supreme Court or a High Court.