In this blogpost, Sonal Srivastava, Student, Amity Law School, Lucknow, writes about what determines sickness and the procedure for filing an application for revival and rehabilitation of a sick company.

Chapter XIX of the Companies Act, 2013 deals with revival and rehabilitation of sick companies. It exclusively covers the provisions for the determination of sickness, application for revival and rehabilitation, appointment of interim administrator, committee of creditors, appointment of administrator, powers and duties of company administrator, scheme for revival and rehabilitation, sanction of scheme, implementation of scheme, winding up of company on the report of certain administrators, punishment for certain offences, assessment of damages against delinquent directors, etc. Thus, the present article shall deal with the certain provisions related to revival and rehabilitation of the sick companies in detail

Determination of Sickness

Section 253 of the Companies Act, 2013 talks about the determination of the sickness of a company. According to it any secured creditor of a company representing 50% or more of outstanding amount of debt, the company has failed to pay the debt within a period of thirty days of the service of the notice of demand or to secure or compound it to the reasonable satisfaction of the creditors, then any secured creditor shall file an application to the tribunal in a prescribed manner along with references of all such evidence for such default, non-payment, etc.

On the receipt of the application from the secured creditor, then the tribunal shall decide within sixty days on to the merit of the application that whether a company has become sick or not.

Once the tribunal is satisfied that a company has become a sick company, and it is in a position to repay its debts, within a reasonable time, it shall order the company to repay its debts.

On satisfaction, the tribunal shall give a reasonable time to the company to make payment of its debts.

Application for revival and rehabilitation

Section 254 of the Companies Act, 2013 talks about the application for revival and rehabilitation and according to which any company that has been determined as sick company under section 253 of the Act can make an application to the tribunal to order for necessary steps to be taken for its revival and rehabilitation and the application shall be accompanied by-

  1. Audited financial statements of the company relating to the immediately preceding financial year;
  2. Such particulars and documents, duly authenticated in such manner, along with such fees as may be prescribed.
  3. A draft scheme for revival and rehabilitation of the company in such manner as may be prescribed.

The application shall be made to the tribunal within sixty days from the date of determination of the company as a sick company by the tribunal under section 253 of the Companies Act, 2013.

Appointment of Interim Administrator

According to section 256 of the Act, as soon as an application is made under section 254 of the Act, the Tribunal shall fix a date of hearing and appoint an interim administrator who shall within 45 days of his appointment fix a meeting with the creditors of the company and prepare a draft scheme for revival and present it before the tribunal within sixty days from the meeting.

Where no draft scheme is provided the tribunal shall direct the interim administrator to take over the management of the business and where an interim administrator is directed to take over the management of the company, the director and the management of the company shall provide full assistance and cooperation to the interim administrator.

Committee of Creditors

According to section 257, an interim administrator shall appoint a committee of creditors such number of creditors as he may determine but shall not exceed seven and these members shall meet in all the meetings and the interim administrator may direct all the promoters, directors, key managerial personnel of the company to come in any meeting and furnish such information as is required and necessary.

Order of tribunal

On the date of hearing fixed by the tribunal, if the resolution is passed by the three-fourth members of the company that it is impossible to revive and rehabilitate the sick company or by adopting such measures the sick company shall be revived and rehabilitated, the tribunal shall pass such orders and where necessary may appoint a company administrator who shall discharge his functions as enumerated in the Act.

Scheme of Revival and Rehabilitation

A scheme for revival and rehabilitation shall be prepared by the company administrator as per the provision of section 261 and it shall include measures like financial reconstruction of the sick company, proper management of the sick company, amalgamation of the sick company with other company or other company with the sick company, takeover of the sick company by solvent company, sale or lease of a part of any assets, rationalization of managerial personnel, such other preventive measure as may be  necessary.

The scheme shall be sanctioned as per section 262 of the Act and shall be binding on the party and shall be implemented by the tribunal by taking all necessary steps.

Winding up of Company on the report of company administrator

As per the provisions of the section 263of the Act, the company shall be wound up if the scheme is not approved by the creditors and the administrator shall submit the report within fifteen days and the tribunal shall order for the winding up of the company.

Rehabilitation and Insolvency Fund

A fund shall be formed under section 269 of the Act which shall be called as the Rehabilitation and Insolvency Fund for the purposes of revival, rehabilitation, and liquidation of the sick companies.


Thus, the Companies Act provides exhaustive measures for the revival and rehabilitation of the sick companies and the tribunal is vested with powers to take all necessary measures for the revival and rehabilitation of the sick companies.


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