(a) Meaning of Unregistered Company (Section 582)
Section 582 of the Companies Act defines an unregistered company. The definition is given in two parts, viz., (i) What the expression ‘unregistered company’ includes; and (ii) What it does not. Clause (b) of Section 582 provides that ‘unregistered company’ shall include any partnership, association or company consisting of more than seven members at the time when the petition for its winding-up is presented before the Court. The expression, however, does not include (i) a railway company incorporated by any Act of Parliament or other Indian law or any Act of Parliament of U .K.; (ii) a company registered under the Companies Act, 1956; or (iii) a company registered under any previous companies law and not being a company the registered office whereof was in Burma, Aden or Pakistan immediately before the separation of that country from India:
An illegal association is not an unregistered company and, therefore, cannot be wound-up under section 583 [Reghubar Dayal Vs. The Sarafa Chamber AIR [1954] All 555].
The definition of ‘unregistered company’ as given under Section 582 should, thus, be read along with Section 11 of the Act. Accordingly, an unregistered company consists of a partnership, association or company having more than seven members but not more than ten members (in case of banking business) and twenty members (in case of other business). If membership exceeds ten or twenty as the case may be, it will be an illegal association and the provisions of Part X of the Act will not apply.
Also, an association or company having less than seven members cannot be wound-up by the Court as an unregistered company.
Winding-up of an Unregistered Company (Section 583)
The rules relating to winding-up of unregistered companies are:
1. No unregistered company shall be wound-up voluntarily or subject to the supervision of the Court [Section 583(3)]. Thus, an unregistered company can only be compulsorily wound-up by the Court.
2. The circumstances under which an unregistered company may be wound-up
are as follows:
(a) If the company is dissolved or has ceased to carry on business or is
carrying on business only for the purposes of winding-up its affairs.
(b) If the company is unable to pay its debts.
(c) If the Court is of the opinion that it is jusrand equitable that the company
should b’e wound-up [Section 583(4)].
As per Section 583(5) an unregistered company shall be deemed unable to pay its
debts in the following circumstances:
(i) if a creditor, to whom the company is indebted in a sum exceeding Rs. 500, has served on the company a demand under his hand requiring the company pay the sum so due, and the company has, for three weeks neglected to pay the sum or to secure or compound for to the satisfaction of the creditor.
(ii) If any suit or other legal proceedings have been instituted against any member for any debt or demand que, or claimed to be due, from the company or from him in his character of member, and notice in writing of the institution of the suit or proceedings having been served on the company and the company has not, within ten days thereafter:
(a) paid, secured or compounded the debt or demand; or (b) procured the suit or legal proceedings to be stayed; or
(c) indemnified the defendant to his satisfaction against the suit of other legal
proceeding and against all costs, damages and expenses to be incurred by him by reason of the same.
(iii) If execution or other process issued on a decree or order of any Court in favour of a creditor against the company or any member thereof is returned unsatisfied in whole or in part.
(iv) If it is otherwise proved to the satisfaction of the Court that the company is
unable to pay its debts. .
As to which Court shall have the jurisdiction in the matter of winding-up of an
unregistered company, sub-section (2) of Section 583 provides as follows:
For the purpose of determining the Court having jurisdiction in the matter of the winding-up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situated in more than one State, then, in each State where it has a principal place of business. The principal place of business of that State, where the winding-up proceedings have been instituted, shall be deemed to be the registered office of the company for the purposes of winding-up.
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