Committee of Inspection :

Either at the time of making an order of the winding- up of a company or at any time thereafter, the Court may direct that a Committee of Inspection shall be appointed in order to act with the liquidator. In the event of such a direction being given, the liquidator is bound to convene a meeting within 2 months from the date of such direction, of the creditor (as ascertained from the company’s books and documents) with a view to determine who are to be members of the committee [Section 464 (1)]. Within 14 days from the date of the creditor‟s meeting or such further time as extended by the Court, the liquidator shall convene a meeting of the contributories so as to consider the decision taken at the creditor’s meeting in regard to the membership of the committee. This decision may either be altogether rejected with or without any modifications [Sub- Section (2)]. If the decision taken at the first meeting is either rejected or accepted with modification, the liquidator shall be duly bound to seek the Court‟s, direction as regards the composition [sub-section (3)].

A committee of inspection shall consist of not more than 12 members, being the creditors and contributories or their attorneys. The proportions of the members of the committee; if not decided upon by the creditors and contributories themselves, shall be determined by the Court. Its function is to assist the liquidator and to inspect his accounts. The committee must meet at such times as and may from time to time appoint; the liquidator or any member may also summon a meeting as an when he thinks necessary. The quorum is 1/3rd of total numbers of member or two, whichever is higher. The committee acts only if there is a quorum and by a majority of members present. A member of the committee ceases to act; (i) when he resigns by notice in writing signed by him and delivered to the liquidator; (ii) when he is adjudged an insolvent or compounds or arranges with his creditors; (iii) when he is absent from five consecutive meetings of the committee without leave of those members who together with himself, represent the creditors or contributories; (iv) when he is removed by ordinary resolution of which 7 day‟s notice has been given by the creditors, if he represents the creditors, or by the contributories, if he represents the contributories.

If any vacancy occurs in the committee, the liquidator must immediately summon a meeting of the creditors or contributories, as the case may be, to fill the vacancy unless he thinks it unnecessary to fill in the vacancy and obtains the leave of the Court in regard thereto (Section 465). A member of the committee of inspecting is in fiduciary position and cannot buy any of the company’s property from the liquidator (In re Blumer (1937) Ch. 489). Similarly, where a member of the committee purchases the property of a company, such as purchase was held to be bad, in as much as he occupied a fiduciary position in relation to the company (Durga Prasad vs. Official Liquidator, Benaras Bank Ltd. A.I.R. 1959 All. 196).