Corporate restructuring under Indian law does not end with approval. In fact, approval is only the beginning. I’ve seen many stakeholders relax once an NCLT-sanctioned scheme under Section 230 is approved, assuming the hard part is over. But execution is where things truly get tested.
Section 231 of the Companies Act, 2013 exists to ensure that compromises and arrangements don’t remain theoretical. It empowers the National Company Law Tribunal (NCLT) to supervise, enforce, modify, and even scrap approved schemes if they become unworkable. In simple terms, Section 231 gives the Tribunal the authority — and the responsibility — to make sure restructuring actually works in practice.
Understanding Section 231 of the Companies Act, 2013
At its core, Section 231 grants the Tribunal authority to enforce compromises or arrangements approved under Section 230.
It recognises a simple truth:
Even a well-designed scheme can fail during implementation.
So the law gives NCLT continuing oversight powers instead of treating approval as the finish line.
Why Section 231 Is So Important
Without Section 231, approved schemes would rely entirely on voluntary compliance.
In real-world scenarios, problems often arise:
- Creditors disagree on implementation
- Timelines are missed
- Financial assumptions fall apart
- Promoters fail to deliver promised actions
Section 231 gives the Tribunal teeth, allowing it to intervene when things drift off track.
Powers Given to NCLT Under Section 231
Section 231 gives the NCLT power to supervise the implementation of the approved scheme.
These powers include:
- Power to Monitor Schemes
NCLT can:
- Oversee progress of implementation
- Call for reports and updates
- Issue directions for smooth execution
This ensures continuous accountability.
- Power to Modify the Scheme
Business realities change. Section 231 allows the Tribunal to:
- Modify terms of the scheme
- Adjust timelines
- Issue corrective directions
This reflects the law’s practical mindset — flexibility instead of rigidity.
- Power to Enforce Compliance
If parties drag their feet, NCLT can:
- Pass enforcement directions
- Compel compliance with approved terms
- Address breaches and delays
This is why the section gives the Tribunal powers to monitor, modify, and enforce schemes.
- Power to Order Winding Up
Here’s where Section 231 shows its seriousness.
If the Tribunal finds that:
- The scheme cannot be implemented
- The arrangement has become unworkable
- Revival is no longer feasible
It can order winding up of the company.
This ensures schemes are not misused merely to delay inevitable liquidation.
Connection Between Section 230 and Section 231
Think of the two as stages of the same process:
- Section 230 → Approval of compromise or arrangement
- Section 231 → Supervision and enforcement after approval
Section 231 acts as a safety net for everyone involved — creditors, shareholders, and the company itself.
Real-World Insight: Why This Section Matters
I once worked on a restructuring where creditors approved a debt reorganisation plan with optimism. Six months later:
- Cash flows collapsed
- Promoter commitments were unmet
- Operational metrics spiraled
Because NCLT had power to supervise the implementation of the approved scheme, the Tribunal stepped in, reviewed the situation, and ultimately initiated winding-up proceedings. Painful, yes — but fair and legally sound.
This is exactly what Section 231 is designed for.
Who Can Approach the Tribunal Under Section 231?
Typically:
- Any party to the scheme
- Creditors
- The company itself
- Regulatory authorities, where applicable
They can raise concerns about:
- Non-implementation
- Breach of terms
- Practical impossibility of the scheme
Key Takeaways for Companies and Creditors
If you’re involved in a compromise or arrangement:
- Approval is not the finish line
- Compliance must be continuous
- Tribunal oversight remains active
- Failure can lead to liquidation
Section 231 ensures seriousness on both sides of the deal.
Common Misconceptions About Section 231
Let’s clear a few myths:
- ❌ “Once approved, NCLT is done” → No, oversight continues
- ❌ “Schemes are permanent” → They can be modified
- ❌ “Winding up is automatic” → It’s a last resort, not a default
Section 231 balances flexibility with discipline.
How Section 231 Protects Stakeholders
This provision:
- Protects creditors from false promises
- Prevents misuse of restructuring routes
- Ensures transparent enforcement
- Maintains confidence in corporate resolution mechanisms
It reinforces trust in the legal restructuring process.
Conclusion
Section 231 of the Companies Act, 2013 ensures that corporate compromises and arrangements don’t end at approval ceremonies and paperwork. By empowering NCLT to supervise, modify, and enforce schemes — and to order winding up if needed — the law ensures that restructuring remains honest, realistic, and accountable.
In a way, Section 231 reminds everyone involved of one truth:
A scheme must work in reality, not just on paper.
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