Sections 295 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.
After a winding-up order, the Tribunal has four tools to bring money into the company and share it fairly. Section 295 lets it order a contributory to pay money he owes the company, with limited set-off. Section 296 lets it make calls. Section 297 makes it adjust the contributories' rights among themselves, and section 298 lets it fix the priority of winding-up costs when assets fall short.
At any time after a winding-up order, the Tribunal may order a contributory on the list to pay any money due to the company (section 295) and may make calls on contributories to the extent of their liability to meet debts, costs and expenses (section 296). It must adjust the rights of contributories among themselves and distribute any surplus (section 297). If assets are insufficient, it may order costs, charges and expenses to be paid in an order of priority it thinks just and proper (section 298).
Who is a contributory, and why these sections still apply
A contributory is a person who is liable to contribute to the assets of a company in the event of its being wound up. The Tribunal settles the list of contributories under section 285, explained in our article on the list of contributories. Sections 295 to 298 operate on that list.
Since the Insolvency and Bankruptcy Code, 2016 (IBC), inability to pay debts and voluntary winding up are dealt with under the Code. Winding up by the Tribunal under the Companies Act continues on the grounds left in section 271. In those cases these four sections supply the Tribunal's powers over contributories.
If you are on a contributory list, or are a liquidator or creditor who needs to recover money from contributories, our legal dispute resolution team can explain what the Tribunal can order and how to respond.
Section 295: payment of debts and extent of set-off
Sub-section (1): orders to pay
"At any time after passing of a winding up order", the Tribunal may order any contributory on the list to pay, in the manner directed, any money due to the company from him or from the estate of the person he represents. This is money exclusive of any call. So a contributory who owes the company, for example, a loan or the price of goods, can be ordered to pay that debt, separately from any call under section 296.
Sub-section (2): when set-off is allowed
When making such an order, the Tribunal may allow set-off in two situations:
| Clause | Company type | Who may get set-off | What is set off |
|---|---|---|---|
| (a) | Unlimited company | The contributory or his estate | Money due to him from the company on any independent dealing or contract, but not money due to him as a member in respect of any dividend or profit |
| (b) | Limited company | A director or manager whose liability is unlimited, or his estate | Such set-off |
The Act says the Tribunal "may" allow set-off, so it is a matter of discretion, not of right. The exclusion in clause (a) matters: a member cannot set off his dividend or profit entitlement against what he owes.
Sub-section (3): set-off against a later call
For any company, limited or unlimited, "when all the creditors have been paid in full", any money due on any account to a contributory from the company may be allowed to him by way of set-off against any subsequent call. The condition is that all creditors have been paid in full.
Section 296: power to make calls
At any time after the winding-up order, and "either before or after it has ascertained the sufficiency of the assets", the Tribunal may:
- (a) make calls on all or any of the contributories on the list, to the extent of their liability, for any money the Tribunal considers necessary to satisfy the debts and liabilities of the company, the costs, charges and expenses of winding up, and for adjustment of the rights of contributories among themselves; and
- (b) make an order for payment of the calls so made.
The key limit is "to the extent of their liability". For a company limited by shares, that generally means the unpaid amount on the shares held; for a company limited by guarantee, the guaranteed amount. The liability depends on the company's constitution and the Act, so check the memorandum and the share position rather than assume. The Tribunal need not wait to learn whether assets are sufficient.
Section 297: adjustment of rights of contributories
The section is one sentence long: the Tribunal "shall adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled thereto". The word is "shall", so this is a duty. If, after paying debts and costs, there is a surplus, the Tribunal distributes it to the persons entitled, which depends on the rights attached to the shares and the articles. If one contributory has paid more than his share of a call, adjustment evens it out.
Section 298: power to order costs
"In the event of the assets of a company being insufficient to satisfy its liabilities", the Tribunal may order payment out of the assets of the costs, charges and expenses incurred in the winding up, "in such order of priority inter se as the Tribunal thinks just and proper". This lets the Tribunal decide which winding-up costs are paid first when there is not enough for all. For the wider priority rules among debts, see preferential payments in winding up and our general guide to who gets paid first.
Related power: detention to prevent absconding
Section 301, which sits just after this group, allows the Tribunal, before or after a winding-up order, to detain a contributory (and seize his books, papers and movable property) if it is satisfied he is about to leave India or abscond, or remove or conceal property, to evade payment of calls or avoid examination.
Practical examples
Example 1: call on partly-paid shares. A company limited by shares has shareholders with unpaid amounts on their shares. After the winding-up order, the Tribunal finds the assets fall short of debts and costs. Under section 296 it can make calls on those contributories up to their liability and order payment.
Example 2: a shareholder who owes the company. A shareholder on the list owes the company for goods bought on credit. Under section 295(1) the Tribunal can order him to pay that amount in addition to any call.
Example 3: no assets for all costs. The assets are not enough for all expenses of the winding up. Under section 298 the Tribunal decides the order in which they are met.
Proposed change
No clause of the Corporate Laws (Amendment) Bill, 2026 amends sections 295 to 298. The Bill is pending and is not law as on 30 September 2026.
Need help with a call or contributory claim?
A call or a payment order can reach personal assets, so the details of liability and set-off matter. We can review the list, the company's constitution and the order with you and explain your options. Write to us about legal dispute resolution.
Key takeaways
- Section 295 lets the Tribunal order a contributory to pay money due to the company, separate from any call.
- Set-off is discretionary and limited: for unlimited companies and for directors or managers with unlimited liability; dividends and profits cannot be set off.
- Once all creditors are paid in full, money due to a contributory can be set off against a later call.
- Section 296 allows calls up to the extent of liability, before or after assets are ascertained.
- Section 297 requires the Tribunal to adjust the contributories' rights and distribute any surplus.
- Section 298 lets the Tribunal fix the priority of winding-up costs when assets are insufficient.
- The Bill, 2026 does not amend these sections and is not law.
Read next
- Section 285: List of contributories
- Sections 293–294: Liquidator's books and audit of accounts
- Sections 299–300: Summons and examination of directors
- 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.