Rules 163 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 163 to 167 of the Companies (Winding Up) Rules, 2020 limit what a Company Liquidator can do on his own. In a winding up by the Tribunal he cannot compromise or abandon a claim, or sell an asset, without the Tribunal's sanction, and every sale is subject to the Tribunal's confirmation. They are stated as amended up to 24 January 2020 (in force from 1 April 2020), with no amendment listed by MCA, per the MCA e-book; later amendments should be checked.
No claim by the company against any person may be compromised or abandoned without the Tribunal's sanction, on notice to the persons it directs. An application for sanction under section 343(1)(ii) or (iii) carries the proposed compromise, the liquidator's affidavit and the final report of the Advisory Committee. Unless the Tribunal orders otherwise, no asset is sold without previous sanction, and every sale is subject to confirmation. Sales are by public auction, sealed tenders, electronic bidding or any manner the Tribunal directs.
Why these rules matter
A winding-up order puts the company's property in the hands of the Company Liquidator, but not at his unchecked discretion. These rules apply the Tribunal's oversight to two decisions that affect creditors and contributories most: letting go of a claim, and selling assets. The Act's provisions on the liquidator's powers and sanction are explained in Sections 343–348 of the Companies Act, 2013. The rules just before these, on disclaimer, are in Rules 156–162; dividends follow in Rules 168–173.
A buyer, a debtor of the company or a creditor affected by a proposed sale or compromise can discuss their position with us through legal dispute resolution.
Rule 163: no claim compromised or abandoned without sanction
In a winding up by the Tribunal, no claim by the company against any person may be compromised or abandoned by the Company Liquidator without the sanction of the Tribunal, upon notice to such person as the Tribunal may direct. The sanction is needed whether the liquidator settles for less or gives up the claim entirely.
Example. Redwood Components Ltd is in liquidation and has a claim for unpaid dues against a customer, Gupta Distributors. The customer offers to pay a smaller sum to close the matter. The liquidator cannot accept on his own authority; he must obtain the Tribunal's sanction, and the Tribunal decides whom to notify.
Rule 164: application for sanction of compromise
Every application for sanction of a compromise or arrangement referred to in clauses (ii) and (iii) of section 343(1) must be:
- accompanied by a copy of the proposed compromise or arrangement; and
- supported by an affidavit of the Company Liquidator, along with the final report of the Advisory Committee, stating that for reasons set out in the affidavit he is satisfied that the proposed compromise or arrangement is beneficial to the company.
The rule ties the application to the Advisory Committee. A liquidator who has not obtained its final report cannot complete the application as the rule describes it. The committee itself is dealt with in Rules 36–44 of these Rules.
Rule 165: sale to be subject to sanction and confirmation
Unless the Tribunal otherwise orders, no property or asset of a company being wound up by the Tribunal is to be sold by the Company Liquidator without the Tribunal's previous sanction, and every sale is subject to confirmation by the Tribunal. There are two checkpoints: sanction before the sale, confirmation after it. A buyer should therefore treat a sale as complete only when the Tribunal confirms it.
Rule 166: procedure at sale
Every sale is held by the Company Liquidator or, if the Tribunal so directs, by an agent or auctioneer approved by the Tribunal, subject to terms and conditions, if any, that the Tribunal approves. All sales are made by:
- public auction;
- inviting sealed tenders;
- electronic bidding; or
- such other manner as the Tribunal may direct.
Rule 167: expenses of sale
Where company property is sold through an auctioneer or other agent, the gross proceeds are, unless the Tribunal orders otherwise, paid over to the Company Liquidator by that auctioneer or agent. The charges and expenses connected with the sale are paid to the auctioneer or agent afterwards, in accordance with the scales, if any, fixed by the Tribunal. The agent therefore does not deduct his charges from the sale money; he hands over everything and is paid in accordance with the Tribunal's scales.
Example. The Tribunal sanctions the sale of Redwood Components' machinery through an approved auctioneer, by public auction. The auctioneer collects the sale money and pays the entire gross amount to the Company Liquidator. His charges are then paid to him according to the Tribunal's scale, and the Tribunal confirms the sale.
Process at a glance
| Step | Rule | Who | Period as printed | Form |
|---|---|---|---|---|
| Compromise or abandonment of a claim | 163 | Liquidator needs Tribunal sanction | Notice to persons as directed | None printed |
| Application for sanction of compromise | 164 | Liquidator | None | Affidavit with Advisory Committee's final report |
| Sale of property | 165 | Liquidator; Tribunal sanctions before, confirms after | None | None printed |
| Procedure at sale | 166 | Liquidator, or approved agent or auctioneer | None | None printed |
| Expenses of sale | 167 | Auctioneer or agent pays gross proceeds to liquidator | None | Charges per Tribunal's scales |
Need help with a sale or settlement in liquidation?
If you are a creditor who wants to know whether a settlement or sale protects your interest, or a buyer who needs to understand the confirmation step, we can help you read the order and the conditions. You can start with a session on legal dispute resolution.
Key takeaways
- The liquidator cannot compromise or abandon a claim without the Tribunal's sanction.
- A sanction application under section 343(1)(ii) or (iii) needs the proposed compromise, the liquidator's affidavit and the Advisory Committee's final report.
- Sales need previous sanction and later confirmation, unless the Tribunal orders otherwise.
- Allowed modes include public auction, sealed tenders and electronic bidding.
- An agent hands over the gross proceeds and is paid according to the Tribunal's scales.
Read next
- Rules 156–162 of the Winding Up Rules: disclaimer of onerous property
- Rules 168–173 of the Winding Up Rules: dividends and return of capital
- Sections 343–348: liquidator's sanction, books and records
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.