Sections 278 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 278 says a winding-up order works for the benefit of all creditors and contributories. Section 279 adds that, once a winding-up order is passed or a provisional liquidator is appointed, no suit or legal proceeding by or against the company can start or continue without the Tribunal's leave.
A winding-up order operates in favour of all creditors and all contributories, as if made on their joint petition (s.278). After a winding-up order or the appointment of a provisional liquidator, no suit or proceeding by or against the company can be commenced or continued without leave of the Tribunal, on terms it may impose. An application for leave must be disposed of within sixty days. Appeals pending before the Supreme Court or a High Court are not affected.
Why these sections still matter after the IBC
Since the Insolvency and Bankruptcy Code, 2016, inability to pay debts and voluntary winding up are handled under the IBC. Winding up by the Tribunal under the Companies Act continues on the grounds left in section 271. Once a winding-up order is passed on such a ground, sections 278 and 279 decide whose interests the order serves and what happens to litigation. Section 280, substituted by the IBC's Eleventh Schedule with effect from 15 November 2016, then gives the Tribunal jurisdiction over suits, claims and questions arising in or relating to the winding up.
If you are a party to a case against a company that has been ordered to be wound up, our legal dispute resolution team can help you work out whether leave is needed and how to seek it.
Section 278: an order for everyone
The text is one sentence: the order for winding up "shall operate in favour of all the creditors and all contributories of the company as if it had been made out on the joint petition of creditors and contributories."
What this means in practice:
- It does not matter who presented the petition, whether the company, a contributory, the Registrar or another authorised person. The order is treated as made for all creditors and contributories together.
- No single petitioner gets an advantage by having filed first. Claims are dealt with in the winding up, in accordance with the priorities in the Act (see distribution of assets and priority of payments).
- Creditors who have not petitioned are not shut out. They prove their debts in the winding up (see proof and ranking of claims).
The section does not say anything about secured creditors' rights. Do not assume either way from this section alone; look at the provisions on preferential and secured claims.
Section 279: stay of suits and proceedings
Sub-section (1): leave of the Tribunal
The bar applies "when a winding up order has been passed or a provisional liquidator has been appointed". From then on:
- No suit or other legal proceeding can be commenced by or against the company; and
- Proceedings pending at the date of the winding-up order cannot be proceeded with,
"except with the leave of the Tribunal and subject to such terms as the Tribunal may impose".
Note the trigger: the stay begins on a provisional liquidator's appointment, not only at the winding-up order. So it can apply while the petition is still pending.
The sixty-day proviso
An application seeking leave "shall be disposed of by the Tribunal within sixty days". The text does not say what follows if the period is missed, so treat it as a time limit the Tribunal is expected to meet.
Sub-section (2): appeals before the Supreme Court or a High Court
Sub-section (1) does not apply to "any proceeding pending in appeal before the Supreme Court or a High Court". The exception is limited to those two courts and to proceedings already pending in appeal. It does not cover, on its words, a first appeal before a lower forum or a fresh proceeding.
| Situation | Leave of Tribunal needed? |
|---|---|
| New suit against the company after a winding-up order | Yes |
| New suit by the company after a winding-up order | Yes |
| Pending suit by or against the company at the date of the order | Yes, to proceed |
| Suit after a provisional liquidator is appointed | Yes |
| Proceeding pending in appeal before the Supreme Court or a High Court | No (s.279(2)) |
What the section does not say
Section 279 speaks of "suit or other legal proceeding". It does not define those words or list proceedings such as criminal prosecutions or tax proceedings. Whether a particular proceeding falls within the bar is a question of interpretation; take advice on the specific proceeding before you assume it does or does not need leave.
Who is affected
- Creditors with pending suits against the company must seek leave or prove their debt in the winding up.
- The company and its directors cannot file or defend suits freely; the liquidator acts for the company (see section 290 on his power to institute or defend proceedings).
- Counterparties in commercial disputes should check the status of the company before filing.
The Tribunal's jurisdiction under section 280 and the liquidator's report under section 281 follow; see sections 281–282.
Proposed change
The Corporate Laws (Amendment) Bill, 2026 has no clause amending section 278 or 279. Its winding-up clause touches section 271 only. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: supplier's suit. A supplier's suit for unpaid invoices is pending against a company when the winding-up order is passed. The supplier cannot proceed without the Tribunal's leave. It can apply for leave (to be decided within sixty days) or prove its claim in the winding up.
Example 2: appeal in the High Court. The company had lost a civil case and its appeal is pending before a High Court. Under section 279(2), the stay in sub-section (1) does not apply to that appeal.
Example 3: provisional liquidator. On a pending petition, the Tribunal appoints a provisional liquidator. A customer who wants to file a new suit against the company now needs leave, even though no winding-up order has been made.
Need help with litigation against a company in liquidation?
Deciding whether to seek leave, prove a claim or pursue an exempt appeal depends on the forum and the stage. We can review the proceedings with you and explain the options. Speak to our team about legal dispute resolution.
Key takeaways
- A winding-up order benefits all creditors and contributories, as if on their joint petition.
- After a winding-up order or provisional liquidator's appointment, suits by or against the company need the Tribunal's leave.
- Leave applications must be decided within sixty days.
- Appeals pending in the Supreme Court or a High Court are outside the stay.
- Section 280, as substituted, gives the Tribunal jurisdiction over suits, claims and questions in the winding up.
- The Bill, 2026 does not amend sections 278 or 279 and is not law.
Read next
- Section 277: Intimation of the winding-up order
- Sections 281–282: Liquidator report and Tribunal directions
- Proof and ranking of claims in company winding up
- Distribution of assets in winding up: priority of payments
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.