Any Director of a company making a declaration under this section

Any Director of a company making a declaration under this section without having reasonable grounds for the formation of the opinion that the company will be able to pay its debts in full within the period specified in the declaration, shall be punishable with imprisonment for a term which may extend to six months, or with fine upto Rs. 50,000’ or with both. If the company is wound-up in pursuance of a resolution passed within the period of five weeks after making the declaration, but its debts are not paid or provided for in full within the period specified in the declaration, it shall be presumed, until the contrary is shown, that the Director did not have

reasonable grounds for his opinion. .

If the above provisions are not complied with, the winding-up shall not be a members’ voluntary winding-up (Vosica Vs. Janda Rubber Works)” and in such case provisions relating to members’ voluntary winding-up, viz., Sections 490 & 498 cannot apply and if a liquidator is appointed in pursuance of Section 490 or 498 such appointment would be bad in law. In such a case the provisions relating to creditors’ voluntary winding-up, Sections 500-509 should be followed and the violation of these provisions will make the winding-up proceeding void ab initi - M. Kakshmiah Vs. Registrar of Companies, Trivandrum unreported case, decided by the Kerala High Court, and if default is made in calling a meeting of the creditors then the company and the Directors, as the case may be, shall be punishable with fine which may extend to 1,000 rupees and, in the case of default by the company, every officer of the company who is in default, shall be liable to the like punishment [Section 500(6)]. The Court may, if moved by the company or its shareholders, instead of treating the winding-up

proceeding as invalid, direct the company to convene the creditors meeting - Light

of Asia Insurance Company, Ret. The above rules will be applicable even where a declaration of solvency has been filed complying with the provisions of Section 488(2).

The company, however, may pass a fresh resolution for its winding-up after

complying with the requirements of Section 488, viz., declaration of solvency.