Section 231 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.
Section 231 gives the Tribunal (NCLT) a continuing role after it has sanctioned a compromise or arrangement under section 230. It may supervise how the scheme is carried out, give directions, modify the scheme, and, if the scheme cannot work and the company cannot pay its debts under it, order winding up.
After an order under section 230 sanctioning a compromise or arrangement, the Tribunal "shall have power to supervise the implementation" of it and may, at the time of the order or later, give directions or make modifications it considers necessary for proper implementation. If it is satisfied that the scheme cannot be implemented satisfactorily, with or without modifications, and the company is unable to pay its debts as per the scheme, it may order winding up, and that order is deemed to be an order under section 273.
Where section 231 fits
Section 230 is the front door. A company proposes a compromise or arrangement with its creditors or members, the Tribunal calls meetings, and, if the requirements are met, sanctions the scheme. Section 232 adds the rules for mergers and demergers. Section 231 is what happens afterwards: the scheme has been sanctioned, but it has to be carried out, and the Tribunal remains involved. Our articles on section 230 and section 232 cover the approval stage.
Sub-section (1): supervision, directions and modifications
Where the Tribunal makes an order under section 230 sanctioning a compromise or arrangement in respect of a company, it:
| Clause | Power | Wording in the text |
|---|---|---|
| (a) | Supervise | "shall have power to supervise the implementation of the compromise or arrangement" |
| (b) | Direct or modify | "may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement" |
Three features of this wording matter.
- Supervision is a power of the Tribunal, not a duty to take over. The scheme is still implemented by the company and the persons named in it. The Tribunal stays in the background, and acts when asked or when it sees a need.
- Timing is open. Directions and modifications can be made with the sanction order itself or "at any time thereafter". A creditor or member who finds that the scheme is not being carried out as sanctioned does not need a fresh scheme; they can approach the Tribunal that sanctioned it.
- The test is "necessary for the proper implementation". The power is about making the scheme work. It is not a licence to rewrite the commercial bargain. A modification must serve implementation of the scheme that was sanctioned.
If a sanctioned scheme is stalling, for example because a payment date is missed or an asset transfer is incomplete, our legal dispute resolution team can help you decide whether to seek directions under this section.
Sub-section (2): when the scheme fails
If the Tribunal is satisfied that:
- the compromise or arrangement sanctioned under section 230 cannot be implemented satisfactorily, with or without modifications, and
- the company is unable to pay its debts as per the scheme,
it "may make an order for winding up the company". The text adds that such an order "shall be deemed to be an order made under section 273".
Both conditions are needed. A scheme that is difficult to implement is not enough if the company can still pay what the scheme requires. Note also the word "may": winding up is discretionary, and the Tribunal can choose to give directions or modifications under sub-section (1) instead.
What "deemed to be an order under section 273" means
Section 273 lists the orders the Tribunal may pass on a winding-up petition, including making a winding-up order. By deeming the order under section 231(2) to be an order under section 273, the Act ties the order into the same winding-up chapter and its consequences. After that, the machinery of Part I of Chapter XX (liquidator, statement of affairs, contributories and so on) applies as in any winding up by the Tribunal. Our article on section 273 explains those orders.
The IBC also deals with insolvency. Since the Insolvency and Bankruptcy Code, 2016, inability to pay debts is largely dealt with under that Code, and the Tribunal's power in section 231(2) sits beside it. Which route applies in a given case is a legal question that depends on who is seeking what; this article does not try to settle it.
Sub-section (3): older schemes
The provisions of the section "shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act sanctioning a compromise or an arrangement". So a scheme sanctioned under the Companies Act, 1956 is within reach of section 231 as well, "so far as may be".
Proposed change
The Corporate Laws (Amendment) Bill, 2026 has no clause that amends section 231 itself. Clause 67 of the Bill would, however, amend section 230 by inserting a proviso that touches sections 230 to 233 together. As proposed, on and from commencement of the amending Act, every application under section 230 or sections 231 to 233 would have to be made to the Tribunal having jurisdiction over the transferee company or the resultant company, and that Tribunal would exercise all the powers in those sections for all companies involved in the scheme. A second proviso would leave applications pending at commencement to be dealt with under the earlier provisions. This is a proposal only. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: missed instalments. A sanctioned scheme requires a company to pay creditors in three yearly instalments. The company is slow with the second. A creditor applies, and the Tribunal gives directions under sub-section (1)(b) on the payment timetable.
Example 2: scheme cannot be carried out. Under a sanctioned arrangement a key asset was to be sold to fund payment, but the sale is impossible. The Tribunal may modify the scheme. If the company cannot pay as per the scheme even after that, it may order winding up under sub-section (2).
Example 3: old scheme. A company has an order sanctioning an arrangement passed years before the 2013 Act came into force. Sub-section (3) allows the Tribunal to apply section 231 to it, so far as may be.
Need help with an arrangement that is not working?
A sanctioned scheme binds the company, its creditors and its members, so problems in carrying it out need to be handled with care. We can review the scheme and the sanction order with you and advise on the options. Talk to our team about legal dispute resolution.
Key takeaways
- Section 231 applies after the Tribunal has sanctioned a scheme under section 230.
- The Tribunal may supervise implementation and give directions or modifications, at the time of sanction or later.
- Winding up is possible only if the scheme cannot be implemented satisfactorily and the company cannot pay its debts as per the scheme.
- A winding-up order under section 231(2) is deemed to be an order under section 273.
- The section also applies, so far as may be, to schemes sanctioned before the 2013 Act.
- The Bill, 2026 proposes a change to which Tribunal hears applications under sections 230 to 233. It is not law.
Read next
- Section 273: Powers of Tribunal in winding up
- Section 234: Merger with a foreign company
- Compromise and arrangement under section 230: NCLT merger guide
- Grounds for winding up by Tribunal: section 271
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.