On which of the following grounds, the Tribunal may order for the winding-up of a company or a petition submitted to it? Indicate the correct code.

(A) Passing of special resolution for the winding up
(B) Conducting affairs in a fraudulent manner
(C) Reduction in membership
(D) Inability to pay debts

Correct option is C

Under Section 271 of the Companies Act, 2013, a company may be wound up by the National Company Law Tribunal (NCLT) on certain grounds, which include:

1. Passing of a special resolution for winding up (Clause a)

   • A company may voluntarily decide to wind up by passing a special resolution in a general meeting. However, Tribunal approval is necessary to finalize the process.

2. Conducting affairs in a fraudulent manner (Clause b)

   • If a company is found involved in fraudulent, unlawful, or improper business activities, the Tribunal can order its winding up to protect investors and creditors.

3. Reduction in membership (Clause c)

   • A public company must have at least 7 members, and a private company must have at least 2 members. If the number falls below the minimum requirement, winding up may be ordered.

4. Inability to pay debts (Clause d)

   • If a company becomes financially insolvent and fails to pay its debts, creditors can file a petition for winding up.

Since all four conditions are valid grounds for winding up, the correct answer is:
(3) (A), (B), (C), and (D) only

Information Booster:

• Winding Up by Tribunal (Section 271, Companies Act, 2013):
  • The Tribunal has the authority to order a company's winding up under specific circumstances to safeguard shareholders and creditors.
  • The Insolvency and Bankruptcy Code (IBC), 2016 has further streamlined insolvency-related winding-up cases.
  • A petition for winding up can be filed by the company itself, creditors, or even the government in case of fraudulent activities.

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