S. Sahoo & Co.

PART III.—Provisions applicable to every mode of winding up

324.Debts of all

descriptions to

be admitted

to proof.

In every winding up (subject, in the case of insolvent companies, to the application

in accordance with the provisions of this Act or of the law of insolvency), all debts payable

on a contingency, and all claims against the company, present or future, certain or contingent,

ascertained or sounding only in damages, shall be admissible to proof against the company,

a just estimate being made, so far as possible, of the value of such debts or claims as may be

subject to any contingency, or may sound only in damages, or for some other reason may not

bear a certain value.

325.Application

of insolvency

rules in

winding up of

insolvent

companies.

(1) In the winding up of an insolvent company, the same rules shall prevail and be

observed with regard to—

(a) debts provable;

(b) the valuation of annuities and future and contingent liabilities; and

as are in force for the time being under the law of insolvency with respect to the estates of

persons adjudged insolvent:

Provided that the security of every secured creditor shall be deemed to be subject to a

pari passu charge in favour of the workmen to the extent of the workmen’s portion therein,

and, where a secured creditor, instead of relinquishing his security and proving his debts,

opts to realise his security,—

(i) the liquidator shall be entitled to represent the workmen and enforce such

charge;

(ii) any amount realised by the liquidator by way of enforcement of such charge

shall be applied rateably for the discharge of workmen’s dues; and

(iii) so much of the debts due to such secured creditor as could not be realised

by him or the amount of the workmen’s portion in his security, whichever is less, shall

rank pari passu with the workmen’s dues for the purposes of section 326.

(2) All persons under sub-section (1) shall be entitled to prove and receive dividends

out of the assets of the company under winding up, and make such claims against the

company as they respectively are entitled to make by virtue of this section:

Provided that if a secured creditor, instead of relinquishing his security and proving

his debts, proceeds to realise his security, he shall be liable to pay his portion of the expenses

incurred by the liquidator, including a provisional liquidator, if any, for the preservation of

the security before its realisation by the secured creditor.

Explanation.—For the purposes of this sub-section, the portion of expenses incurred

by the liquidator for the preservation of a security which the secured creditor shall be liable

to pay shall be the whole of the expenses less an amount which bears to such expenses the

same proportion as the workmen’s portion in relation to the security bears to the value of the

security.

(3) For the purposes of this section, section 326 and section 327,—

(a) “workmen’’, in relation to a company, means the employees of the company,

being workmen within the meaning of clause (s) of section 2 of the Industrial Disputes

Act, 1947;

(b) “workmen’s dues’’, in relation to a company, means the aggregate of the

following sums due from the company to its workmen, namely:—

(i) all wages or salary including wages payable for time or piece work and

salary earned wholly or in part by way of commission of any workman in respect

of services rendered to the company and any compensation payable to any

workman under any of the provisions of the Industrial Disputes Act, 1947;

(ii) all accrued holiday remuneration becoming payable to any workman

or, in the case of his death, to any other person in his right on the termination of

his employment before or by the effect of the winding up order or resolution;

(iii) unless the company is being wound up voluntarily merely for the

purposes of reconstruction or amalgamation with another company or unless

the company has, at the commencement of the winding up, under such a contract

with insurers as is mentioned in section 14 of the Workmen’s Compensation Act,

1923, rights capable of being transferred to and vested in the workmen, all amount

due in respect of any compensation or liability for compensation under the said

Act in respect of the death or disablement of any workman of the company;

(iv) all sums due to any workman from the provident fund, the pension

fund, the gratuity fund or any other fund for the welfare of the workmen,

maintained by the company;

company, means the amount which bears to the value of the security the same proportion

as the amount of the workmen’s dues bears to the aggregate of the amount of workmen’s

dues and the amount of the debts due to the secured creditors.

Illustration

The value of the security of a secured creditor of a company is Rs. 1,00,000. The total

amount of the workmen’s dues is Rs. 1,00,000. The amount of the debts due from the company

to its secured creditors is Rs. 3,00,000. The aggregate of the amount of workmen’s dues and

the amount of debts due to secured creditors is Rs. 4,00,000. The workmen’s portion of the

security is, therefore, one-fourth of the value of the security, that is Rs. 25,000.

326.Overriding

preferential

payments.

(1) Notwithstanding anything contained in this Act or any other law for the time

being in force, in the winding up of a company,—

(a) workmen’s dues; and

(b) debts due to secured creditors to the extent such debts rank under clause

(iii) of the proviso to sub-section (1) of section 325 pari passu with such dues,

shall be paid in priority to all other debts:

Provided that in case of the winding up of a company, the sums towards wages or

salary referred to in sub-clause (i) of clause (b) of sub-section (3) of section 325, which are

payable for a period of two years preceding the winding up order or such other period as

may be prescribed, shall be paid in priority to all other debts (including debts due to secured

creditors), within a period of thirty days of sale of assets and shall be subject to such charge

over the security of secured creditors as may be prescribed.

(2) The debts payable under the proviso to sub-section (1) shall be paid in full before

any payment is made to secured creditors and thereafter debts payable under that

sub-section shall be paid in full, unless the assets are insufficient to meet them, in which case

they shall abate in equal proportions.

327.Preferential

payments.

(1) In a winding up, subject to the provisions of section 326, there shall be paid in

priority to all other debts,—

(a) all revenues, taxes, cesses and rates due from the company to the Central

Government or a State Government or to a local authority at the relevant date, and having

become due and payable within the twelve months immediately before that date;

(b) all wages or salary including wages payable for time or piece work and salary

earned wholly or in part by way of commission of any employee in respect of services

rendered to the company and due for a period not exceeding four months within the

twelve months immediately before the relevant date, subject to the condition that the

amount payable under this clause to any workman shall not exceed such amount as

may be notified;

the case of his death, to any other person claiming under him, on the termination of his

employment before, or by the winding up order, or, as the case may be, the dissolution

of the company;

(d) unless the company is being wound up voluntarily merely for the purposes

of reconstruction or amalgamation with another company, all amount due in respect of

contributions payable during the period of twelve months immediately before the

relevant date by the company as the employer of persons under the Employees’ State

Insurance Act, 1948 or any other law for the time being in force;

(e) unless the company has, at the commencement of winding up, under such a

contract with any insurer as is mentioned in section 14 of the Workmen’s Compensation

Act, 1923, rights capable of being transferred to and vested in the workmen, all amount

due in respect of any compensation or liability for compensation under the said Act in

respect of the death or disablement of any employee of the company:

Provided that where any compensation under the said Act is a weekly payment,

the amount payable under this clause shall be taken to be the amount of the lump sum

for which such weekly payment could, if redeemable, be redeemed, if the employer has

made an application under that Act;

(f) all sums due to any employee from the provident fund, the pension fund, the

gratuity fund or any other fund for the welfare of the employees, maintained by the

company; and

(g) the expenses of any investigation held in pursuance of sections 213 and 216,

in so far as they are payable by the company.

(2) Where any payment has been made to any employee of a company on account of

wages or salary or accrued holiday remuneration, himself or, in the case of his death, to any

other person claiming through him, out of money advanced by some person for that purpose,

the person by whom the money was advanced shall, in a winding up, have a right of priority

in respect of the money so advanced and paid-up to the amount by which the sum in respect

of which the employee or other person in his right would have been entitled to priority in the

winding up has been reduced by reason of the payment having been made.

(3) The debts enumerated in this section shall—

(a) rank equally among themselves and be paid in full, unless the assets are

insufficient to meet them, in which case they shall abate in equal proportions; and

(b) so far as the assets of the company available for payment to general creditors

are insufficient to meet them, have priority over the claims of holders of debentures

under any floating charge created by the company, and be paid accordingly out of any

property comprised in or subject to that charge.

(4) Subject to the retention of such sums as may be necessary for the costs and

expenses of the winding up, the debts under this section shall be discharged forthwith so far

as the assets are sufficient to meet them, and in the case of the debts to which priority is

given under clause (d) of sub-section (1), formal proof thereof shall not be required except in

so far as may be otherwise prescribed.

(5) In the event of a landlord or other person distraining or having distrained on any

goods or effects of the company within three months immediately before the date of a

winding up order, the debts to which priority is given under this section shall be a first charge

on the goods or effects so distrained on or the proceeds of the sale thereof:

Provided that, in respect of any money paid under any such charge, the landlord or

other person shall have the same rights of priority as the person to whom the payment is made.

(6) Any remuneration in respect of a period of holiday or of absence from work on

medical grounds through sickness or other good cause shall be deemed to be wages in

respect of services rendered to the company during that period.

Explanation.—For the purposes of this section,—

(a) the expression “accrued holiday remuneration” includes, in relation to any

person, all sums which, by virtue either of his contract of employment or of any

enactment including any order made or direction given thereunder, are payable on

account of the remuneration which would, in the ordinary course, have become payable

to him in respect of a period of holiday, had his employment with the company continued

until he became entitled to be allowed the holiday;

(b) the expression “employee” does not include a workman; and

(i) in the case of a company being wound up by the Tribunal, the date of

appointment or first appointment of a provisional liquidator, or if no such

appointment was made, the date of the winding up order, unless, in either case,

the company had commenced to be wound up voluntarily before that date; and

(ii) in any other case, the date of the passing of the resolution for the

voluntary winding up of the company.

328.Fraudulent

preference.

(1) Where a company has given preference to a person who is one of the creditors

of the company or a surety or guarantor for any of the debts or other liabilities of the

company, and the company does anything or suffers anything done which has the effect of

putting that person into a position which, in the event of the company going into liquidation,

will be better than the position he would have been in if that thing had not been done prior

to six months of making winding up application, the Tribunal, if satisfied that, such transaction

is a fraudulent preference may order as it may think fit for restoring the position to what it

would have been if the company had not given that preference.

(2) If the Tribunal is satisfied that there is a preference transfer of property, movable or

immovable, or any delivery of goods, payment, execution made, taken or done by or against

a company within six months before making winding up application, the Tribunal may order

as it may think fit and may declare such transaction invalid and restore the position.

329.Transfers not

in good faith

to be void.

Any transfer of property, movable or immovable, or any delivery of goods, made

by a company, not being a transfer or delivery made in the ordinary course of its business or

in favour of a purchaser or encumbrance in good faith and for valuable consideration, if made

within a period of one year before the presentation of a petition for winding up by the

Tribunal or the passing of a resolution for voluntary winding up of the company, shall be

void against the Company Liquidator.

330. Certain

transfers to

be void.

Any transfer or assignment by a company of all its properties or assets to trustees

for the benefit of all its creditors shall be void.

331. Liabilities and rights of certain persons fraudulently preferred

(1) Where a company is being wound up and anything made, taken or done after

the commencement of this Act is invalid under section 328 as a fraudulent preference of a

person interested in property mortgaged or charged to secure the company’s debt, then,

without prejudice to any rights or liabilities arising, apart from this provision, the person

preferred shall be subject to the same liabilities, and shall have the same rights, as if he had

undertaken to be personally liable as a surety for the debt, to the extent of the mortgage or

charge on the property or the value of his interest, whichever is less.

(2) The value of the interest of the person preferred under sub-section (1) shall be

determined as at the date of the transaction constituting the fraudulent preference, as if the

interest were free of all encumbrances other than those to which the mortgage or charge for

the debt of the company was then subject.

(3) On an application made to the Tribunal with respect to any payment on the ground

that the payment was a fraudulent preference of a surety or guarantor, the Tribunal shall

have jurisdiction to determine any questions with respect to the payment arising between

the person to whom the payment was made and the surety or guarantor and to grant relief in

respect thereof, notwithstanding that it is not necessary so to do for the purposes of the

winding up, and for that purpose, may give leave to bring in the surety or guarantor as a third

party as in the case of a suit for the recovery of the sum paid.

(4) The provisions of sub-section (3) shall apply mutatis mutandis in relation to

transactions other than payment of money.

332.Effect of floating charge.

Where a company is being wound up, a floating charge on the undertaking or

property of the company created within the twelve months immediately preceding the

commencement of the winding up, shall, unless it is proved that the company immediately

after the creation of the charge was solvent, be invalid, except for the amount of any cash

paid to the company at the time of, or subsequent to the creation of, and in consideration for,

the charge, together with interest on that amount at the rate of five per cent. per annum or

such other rate as may be notified by the Central Government in this behalf.

333.Disclaimer of onerous property

(1) Where any part of the property of a company which is being wound up

consists of—

(a) land of any tenure, burdened with onerous covenants;

(b) shares or stocks in companies;

of the possessor thereof being bound either to the performance of any onerous act or

to the payment of any sum of money; or

(d) unprofitable contracts,

the Company Liquidator may, notwithstanding that he has endeavoured to sell or has taken

possession of the property or exercised any act of ownership in relation thereto or done

anything in pursuance of the contract, with the leave of the Tribunal and subject to the

provisions of this section, by writing signed by him, at any time within twelve months after

the commencement of the winding up or such extended period as may be allowed by the

Tribunal, disclaim the property:

Provided that where the Company Liquidator had not become aware of the existence of

any such property within one month from the commencement of the winding up, the power

of disclaiming the property may be exercised at any time within twelve months after he has

become aware thereof or such extended period as may be allowed by the Tribunal.

(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights,

interest and liabilities of the company in or in respect of the property disclaimed, but shall

not, except so far as is necessary for the purpose of releasing the company and the property

of the company from liability, affect the rights, interest or liabilities of any other person.

(3) The Tribunal, before or on granting leave to disclaim, may require such notices to

be given to persons interested, and impose such terms as a condition of granting leave, and

make such other order in the matter as the Tribunal considers just and proper.

(4) The Company Liquidator shall not be entitled to disclaim any property in any case

where an application in writing has been made to him by any person interested in the

property requiring him to decide whether he will or will not disclaim and the Company

Liquidator has not, within a period of twenty-eight days after the receipt of the application or

such extended period as may be allowed by the Tribunal, give notice to the applicant that he

intends to apply to the Tribunal for leave to disclaim, and in case the property is under a

contract, if the Company Liquidator after such an application as aforesaid does not within

the said period or extended period disclaim the contract, he shall be deemed to have adopted it.

(5) The Tribunal may, on the application of any person who is, as against the Company

Liquidator, entitled to the benefit or subject to the burden of a contract made with the

company, make an order rescinding the contract on such terms as to payment by or to either

party of damages for the non-performance of the contract, or otherwise as the Tribunal

considers just and proper, and any damages payable under the order to any such person may

be proved by him as a debt in the winding up.

(6) The Tribunal may, on an application by any person who either claims any interest

in any disclaimed property or is under any liability not discharged under this Act in respect

of any disclaimed property, and after hearing any such persons as it thinks fit, make an order

for the vesting of the property in, or the delivery of the property to, any person entitled

thereto or to whom it may seem just that the property should be delivered by way of

compensation for such liability as aforesaid, or a trustee for him, and on such terms as the

Tribunal considers just and proper, and on any such vesting order being made, the property

comprised therein shall vest accordingly in the person named therein in that behalf without

any conveyance or assignment for the purpose:

Provided that where the property disclaimed is of a leasehold nature, the Tribunal shall

not make a vesting order in favour of any person claiming under the company, whether as

under-lessee or as mortgagee or holder of a charge by way of demise, except upon the terms

of making that person—

(a) subject to the same liabilities and obligations as those to which the company

was subject under the lease in respect of the property at the commencement of the

winding up; or

(b) if the Tribunal thinks fit, subject only to the same liabilities and obligations as

if the lease had been assigned to that person at that date,

and in either event as if the lease had comprised only the property comprised in the vesting

order, and any mortgagee or under-lessee declining to accept a vesting order upon such

terms shall be excluded from all interest in, and security upon the property, and, if there is no

person claiming under the company who is willing to accept an order upon such terms, the

Tribunal shall have power to vest the estate and interest of the company in the property in

any person liable, either personally or in a representative character, and either alone or jointly

with the company, to perform the covenants of the lessee in the lease, free and discharged

from all estates, encumbrances and interests created therein by the company.

(7) Any person affected by the operation of a disclaimer under this section shall be

deemed to be a creditor of the company to the amount of the compensation or damages

payable in respect of such effect, and may accordingly prove the amount as a debt in the

winding up.

334.Transfers,

etc., after

commencement

of winding up

to be void.

(1) In the case of a voluntary winding up, any transfer of shares in the company,

not being a transfer made to or with the sanction of the Company Liquidator, and any

alteration in the status of the members of the company, made after the commencement of the

winding up, shall be void.

(2) In the case of a winding up by the Tribunal, any disposition of the property,

including actionable claims, of the company, and any transfer of shares in the company or

alteration in the status of its members, made after the commencement of the winding up,

shall, unless the Tribunal otherwise orders, be void.

335.Certain

attachments,

executions,

etc., in

winding up by

Tribunal to be

void.

(1) Where any company is being wound up by the Tribunal,—

(a) any attachment, distress or execution put in force, without leave of the

Tribunal against the estate or effects of the company, after the commencement of the

winding up; or

(b) any sale held, without leave of the Tribunal of any of the properties or effects

of the company, after such commencement,

shall be void.

(2) Nothing in this section shall apply to any proceedings for the recovery of any tax

or impost or any dues payable to the Government.

336.Offences by

officers of

companies in

liquidation.

(1) If any person, who is or has been an officer of a company which, at the time of

the commission of the alleged offence, is being wound up, whether by the Tribunal or

voluntarily, or which is subsequently ordered to be wound up by the Tribunal or which

subsequently passes a resolution for voluntary winding up,—

(a) does not, to the best of his knowledge and belief, fully and truly disclose to

the Company Liquidator all the property, movable and immovable, of the company, and

how and to whom and for what consideration and when the company disposed of any

part thereof, except such part as has been disposed of in the ordinary course of the

business of the company;

(b) does not deliver up to the Company Liquidator, or as he directs, all such part

of the movable and immovable property of the company as is in his custody or under

his control and which he is required by law to deliver up;

books and papers of the company as are in his custody or under his control and which

he is required by law to deliver up;

(d) within the twelve months immediately before the commencement of the

winding up or at any time thereafter,—

(i) conceals any part of the property of the company to the value of one

thousand rupees or more, or conceals any debt due to or from the company;

(ii) fraudulently removes any part of the property of the company to the

value of one thousand rupees or more;

(iii) conceals, destroys, mutilates or falsifies, or is privy to the concealment,

destruction, mutilation or falsification of, any book or paper affecting or relating

to, the property or affairs of the company;

(iv) makes, or is privy to the making of, any false entry in any book or

paper affecting or relating to, the property or affairs of the company;

(v) fraudulently parts with, alters or makes any omission in, or is privy to

the fraudulent parting with, altering or making of any omission in, any book or

paper affecting or relating to the property or affairs of the company;

(vi) by any false representation or other fraud, obtains on credit, for or on

behalf of the company, any property which the company does not subsequently

pay for;

(vii) under the false pretence that the company is carrying on its business,

obtains on credit, for or on behalf of the company, any property which the

company does not subsequently pay for; or

(viii) pawns, pledges or disposes of any property of the company which

has been obtained on credit and has not been paid for, unless such pawning,

pledging or disposing of the property is in the ordinary course of business of

the company;

(e) makes any material omission in any statement relating to the affairs of the

company;

(f) knowing or believing that a false debt has been proved by any person under

the winding up, fails for a period of one month to inform the Company Liquidator

thereof;

(g) after the commencement of the winding up, prevents the production of any

book or paper affecting or relating to the property or affairs of the company;

(h) after the commencement of the winding up or at any meeting of the creditors

of the company within the twelve months next before the commencement of the winding

up, attempts to account for any part of the property of the company by fictitious

losses or expenses; or

(i) is guilty of any false representation or fraud for the purpose of obtaining the

consent of the creditors of the company or any of them, to an agreement with reference

to the affairs of the company or to the winding up,

he shall be punishable with imprisonment for a term which shall not be less than three years

but which may extend to five years and with fine which shall not be less than one lakh rupees

but which may extend to three lakh rupees:

Provided that it shall be a good defence if the accused proves that he had no intent to

defraud or to conceal the true state of affairs of the company or to defeat the law.

(2) Where any person pawns, pledges or disposes of any property in circumstances

which amount to an offence under sub-clause (viii) of clause (d) of sub-section (1), every

person who takes in pawn or pledge or otherwise receives the property, knowing it to be

pawned, pledged, or disposed of in such circumstances as aforesaid, shall be punishable

with imprisonment for a term which shall not be less than three years but which may extend

to five years and with fine which shall not be less than three lakh rupees but which may

extend to five lakh rupees.

Explanation.—For the purposes of this section, the expression “officer” includes any

person in accordance with whose directions or instructions the directors of the company

have been accustomed to act.

337.Penalty for

frauds by

officers.

If any person, being at the time of the commission of the alleged offence an officer

of a company which is subsequently ordered to be wound up by the Tribunal or which

subsequently passes a resolution for voluntary winding up,—

(a) has, by false pretences or by means of any other fraud, induced any person

to give credit to the company;

(b) with intent to defraud creditors of the company or any other person, has

made or caused to be made any gift or transfer of, or charge on, or has caused or

connived at the levying of any execution against, the property of the company; or

any part of the property of the company since the date of any unsatisfied judgment or

order for payment of money obtained against the company or within two months

before that date,

he shall be punishable with imprisonment for a term which shall not be less than one year but

which may extend to three years and with fine which shall not be less than one lakh rupees

but which may extend to three lakh rupees.

338.Liability

where proper

accounts not

kept.

(1) Where a company is being wound up, if it is shown that proper books of

account were not kept by the company throughout the period of two years immediately

preceding the commencement of the winding up, or the period between the incorporation of

the company and the commencement of the winding up, whichever is shorter, every officer of

the company who is in default shall, unless he shows that he acted honestly and that in the

circumstances in which the business of the company was carried on, the default was excusable,

be punishable with imprisonment for a term which shall not be less than one year but which

may extend to three years and with fine which shall not be less than one lakh rupees but

which may extend to three lakh rupees.

(2) For the purposes of sub-section (1), it shall be deemed that proper books of

account have not been kept in the case of any company,—

(a) if such books of account as are necessary to exhibit and explain the

transactions and financial position of the business of the company, including books

containing entries made from day-to-day in sufficient detail of all cash received and all

cash paid, have not been kept; and

(b) where the business of the company has involved dealings in goods,

statements of the annual stock takings and, except in the case of goods sold by way of

ordinary retail trade, of all goods sold and purchased, showing the goods and the

buyers and the sellers thereof in sufficient detail to enable those goods and those

buyers and sellers to be identified, have not been kept.

339.Liability for

fraudulent

conduct of

business.

(1) If in the course of the winding up of a company, it appears that any business

of the company has been carried on with intent to defraud creditors of the company or any

other persons or for any fraudulent purpose, the Tribunal, on the application of the Official

Liquidator, or the Company Liquidator or any creditor or contributory of the company, may,

if it thinks it proper so to do, declare that any person, who is or has been a director, manager,

or officer of the company or any persons who were knowingly parties to the carrying on of

the business in the manner aforesaid shall be personally responsible, without any limitation

of liability, for all or any of the debts or other liabilities of the company as the Tribunal may

direct:

Provided that on the hearing of an application under this sub-section, the Official

Liquidator or the Company Liquidator, as the case may be, may himself give evidence or call

witnesses.

(2) Where the Tribunal makes any such declaration, it may give such further directions

as it thinks proper for the purpose of giving effect to that declaration and, in particular,—

(a) make provision for making the liability of any such person under the declaration

a charge on any debt or obligation due from the company to him, or on any mortgage

or charge or any interest in any mortgage or charge on any assets of the company held

by or vested in him, or any person on his behalf, or any person claiming as assignee

from or through the person liable or any person acting on his behalf;

(b) make such further order as may be necessary for the purpose of enforcing

any charge imposed under this sub-section.

(3) Where any business of a company is carried on with such intent or for such

purpose as is mentioned in sub-section (1), every person who was knowingly a party to the

carrying on of the business in the manner aforesaid, shall be liable for action under

section 447.

(4) This section shall apply, notwithstanding that the person concerned may be

punishable under any other law for the time being in force in respect of the matters on the

ground of which the declaration is to be made.

Explanation.—For the purposes of this section,—

(a) the expression “assignee” includes any person to whom or in whose favour,

by the directions of the person liable, the debt, obligation, mortgage or charge was

created, issued or transferred or the interest was created, but does not include an

assignee for valuable consideration, not including consideration by way of marriage,

given in good faith and without notice of any of the matters on the ground of which the

declaration is made;

(b) the expression “officer” includes any person in accordance with whose

directions or instructions the directors of the company have been accustomed

to act.

340.Power of

Tribunal to

assess

damages

against

delinquent

directors, etc.

(1) If in the course of winding up of a company, it appears that any person who

has taken part in the promotion or formation of the company, or any person, who is or has

been a director, manager, Company Liquidator or officer of the company—

(a) has misapplied, or retained, or become liable or accountable for, any money

or property of the company; or

(b) has been guilty of any misfeasance or breach of trust in relation to the

company,

the Tribunal may, on the application of the Official Liquidator, or the Company Liquidator, or

of any creditor or contributory, made within the period specified in that behalf in sub-section

(2), inquire into the conduct of the person, director, manager, Company Liquidator or officer

aforesaid, and order him to repay or restore the money or property or any part thereof

respectively, with interest at such rate as the Tribunal considers just and proper, or to

contribute such sum to the assets of the company by way of compensation in respect of the

misapplication, retainer, misfeasance or breach of trust, as the Tribunal considers just and

proper.

(2) An application under sub-section (1) shall be made within five years from the date

of the winding up order, or of the first appointment of the Company Liquidator in the winding

up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be,

whichever is longer.

(3) This section shall apply, notwithstanding that the matter is one for which the

person concerned may be criminally liable.

341.Liability

under sections

339 and 340

to extend to

partners or

directors in

firms or

companies.

Where a declaration under section 339 or an order under section 340 is made in

respect of a firm or body corporate, the Tribunal shall also have power to make a declaration

under section 339, or pass an order under section 340, as the case may be, in respect of any

person who was at the relevant time a partner in that firm or a director of that body corporate.

342.Prosecution

of delinquent

officers and

members of

company.

(1) If it appears to the Tribunal in the course of a winding up by the Tribunal, that

any person, who is or has been an officer, or any member, of the company has been guilty of

any offence in relation to the company, the Tribunal may, either on the application of any

person interested in the winding up or suo motu, direct the liquidator to prosecute the

offender or to refer the matter to the Registrar.

(2) If it appears to the Company Liquidator in the course of a voluntary winding up that

any person,who is or has been an officer, or any member, of the company has been guilty of

any offence in relation to the company under this Act, he shall forthwith report the matter to

the Registrar and shall furnish to him such information and give to him such access to and

facilities for inspecting and taking copies of any books and papers, being information or

books and papers in the possession or under the control of the Company Liquidator and

relating to the matter in question, as the Registrar may require.

(3) Where any report is made under sub-section (2) to the Registrar,—

(a) if he thinks fit, he may apply to the Central Government for an order to make

further inquiry into the affairs of the company by any person designated by him and

for conferring on such person all the powers of investigation as are provided under

this Act;

(b) if he considers that the case is one in which a prosecution ought to be

instituted, he shall report the matter to the Central Government, and that Government

may, after taking such legal advice as it thinks fit, direct the Registrar to institute

prosecution:

Provided that no report shall be made by the Registrar under this clause without first

giving the accused person a reasonable opportunity of making a statement in writing to the

Registrar and of being heard thereon.

(4) If it appears to the Tribunal in the course of a voluntary winding up that any

person, who is or has been an officer, or any member, of the company has been guilty as

aforesaid, and that no report with respect to the matter has been made by the Company

Liquidator to the Registrar under sub-section (2), the Tribunal may, on the application of any

person interested in the winding up or suo motu, direct the Company Liquidator to make

such a report, and on a report being made, the provisions of this section shall have effect as

though the report had been made in pursuance of the provisions of sub-section (2).

(5) When any prosecution is instituted under this section, it shall be the duty of the

liquidator and of every person, who is or has been an officer and agent of the company to

give all assistance in connection with the prosecution which he is reasonably able to give.

Explanation.—For the purposes of this sub-section, the expression “agent”, in relation

to a company, shall include any banker or legal adviser of the company and any person

employed by the company as auditor.

(6) If a person fails or neglects to give assistance required by sub-section (5), he shall

be liable to pay fine which shall not be less than twenty-five thousand rupees but which may

extend to one lakh rupees.

343.Company

Liquidator to

exercise

certain

powers

subject to

sanction.

(1) The Company Liquidator may—

(a) with the sanction of the Tribunal, when the company is being wound up by

the Tribunal; and

(b) with the sanction of a special resolution of the company and prior approval

of the Tribunal, in the case of a voluntary winding up,—

(i) pay any class of creditors in full;

(ii) make any compromise or arrangement with creditors or persons claiming

to be creditors, or having or alleging themselves to have any claim, present or

future, certain or contingent, against the company, or whereby the company

may be rendered liable; or

(iii) compromise any call or liability to call, debt, and liability capable of

resulting in a debt, and any claim, present or future, certain or contingent,

ascertained or sounding only in damages, subsisting or alleged to subsist

between the company and a contributory or alleged contributory or other debtor

or person apprehending liability to the company, and all questions in any way

relating to or affecting the assets or liabilities or the winding up of the company,

on such terms as may be agreed, and take any security for the discharge of any

such call, debt, liability or claim, and give a complete discharge in respect thereof.

(2) Notwithstanding anything contained in sub-section (1), in the case of a winding up

by the Tribunal, the Central Government may make rules to provide that the Company

Liquidator may, under such circumstances, if any, and subject to such conditions, restrictions

and limitations, if any, as may be prescribed, exercise any of the powers referred to in subclause

(ii) or sub-clause (iii) of clause (b) of sub-section (1) without the sanction of the

Tribunal.

(3) Any creditor or contributory may apply in the manner prescribed to the Tribunal

with respect to any exercise or proposed exercise of powers by the Company Liquidator

under this section, and the Tribunal shall after giving a reasonable opportunity to such

applicant and the Company Liquidator, pass such orders as it may think fit.

344.Statement

that company

is in

liquidation.

(1) Where a company is being wound up, whether by the Tribunal or voluntarily,

every invoice, order for goods or business letter issued by or on behalf of the company or a

Company Liquidator of the company, or a receiver or manager of the property of the company,

being a document on or in which the name of the company appears, shall contain a statement

that the company is being wound up.

(2) If a company contravenes the provisions of sub-section (1), the company, and

every officer of the company, the Company Liquidator and any receiver or manager, who

wilfully authorises or permits the non-compliance, shall be punishable with fine which shall

not be less than fifty thousand rupees but which may extend to three lakh rupees.

345.Books and

papers of

company to

be evidence.

Where a company is being wound up, all books and papers of the company and

of the Company Liquidator shall, as between the contributories of the company, be prima

facie evidence of the truth of all matters purporting to be recorded therein.

346.Inspection of

books and

papers by

creditors and

contributories.

(1) At any time after the making of an order for the winding up of a company by

the Tribunal, any creditor or contributory of the company may inspect the books and papers

of the company only in accordance with, and subject to such rules as may be prescribed.

(2) Nothing contained in sub-section (1) shall exclude or restrict any rights conferred

by any law for the time being in force—

(a) on the Central Government or a State Government;

(b) on any authority or officer thereof; or

such authority or officer.

347.Disposal of

books and

papers of

company.

(1) When the affairs of a company have been completely wound up and it is about

to be dissolved, its books and papers and those of the Company Liquidator may be disposed

of as follows:—

(a) in the case of winding up by the Tribunal, in such manner as the Tribunal

directs; and

(b) in the case of voluntary winding up, in such manner as the company by

special resolution with the prior approval of the creditors direct.

(2) After the expiry of five years from the dissolution of the company, no responsibility

shall devolve on the company, the Company Liquidator, or any person to whom the custody

of the books and papers has been entrusted, by reason of any book or paper not being

forthcoming to any person claiming to be interested therein.

(3) The Central Government may, by rules,—

(a) prevent for such period as it thinks proper the destruction of the books and

papers of a company which has been wound up and of its Company Liquidator;

and

(b) enable any creditor or contributory of the company to make representations

to the Central Government in respect of the matters specified in clause (a) and to

appeal to the Tribunal from any order which may be made by the Central Government

in the matter.

(4) If any person acts in contravention of any rule framed or an order made under

sub-section (3), he shall be punishable with imprisonment for a term which may extend to six

months or with fine which may extend to fifty thousand rupees, or with both.

348.Information

as to pending

liquidations.

(1) If the winding up of a company is not concluded within one year after its

commencement, the Company Liquidator shall, unless he is exempted from so doing either

wholly or in part by the Central Government, within two months of the expiry of such year

and thereafter until the winding up is concluded, at intervals of not more than one year or at

such shorter intervals, if any, as may be prescribed, file a statement in such form containing

such particulars as may be prescribed, duly audited, by a person qualified to act as auditor of

the company, with respect to the proceedings in, and position of, the liquidation,—

(a) in the case of a winding up by the Tribunal, with the Tribunal; and

(b) in the case of a voluntary winding up, with the Registrar:

Provided that no such audit as is referred to in this sub-section shall be necessary

where the provisions of section 294 apply.

(2) When the statement is filed with the Tribunal under clause (a) of sub-section (1), a

copy shall simultaneously be filed with the Registrar and shall be kept by him along with the

other records of the company.

(3) Where a statement referred to in sub-section (1) relates to a Government company

in liquidation, the Company Liquidator shall forward a copy thereof—

(a) to the Central Government, if that Government is a member of the Government

company;

(b) to any State Government, if that Government is a member of the Government

company; or

are members of the Government company.

(4) Any person stating himself in writing to be a creditor or contributory of the company

shall be entitled, by himself or by his agent, at all reasonable times, on payment of the

prescribed fee, to inspect the statement referred to in sub-section (1), and to receive a copy

thereof or an extract therefrom.

(5) Any person fraudulently stating himself to be a creditor or contributory under subsection

(4) shall be deemed to be guilty of an offence under section 182 of the Indian Penal

Code, and shall, on the application of the Company Liquidator, be punishable accordingly.

(6) If a Company Liquidator contravenes the provisions of this section, the Company

Liquidator shall be punishable with fine which may extend to five thousand rupees for every

day during which the failure continues.

(7) If a Company Liquidator makes wilful default in causing the statement referred to in

sub-section (1) audited by a person who is not qualified to act as an auditor of the company,

the Company Liquidator shall be punishable with imprisonment for a term which may extend

to six months or with fine which may extend to one lakh rupees, or with both.

349.Official

Liquidator to

make

payments

into public

account of

India.

Every Official Liquidator shall, in such manner and at such times as may be

prescribed, pay the monies received by him as Official Liquidator of any company, into the

public account of India in the Reserve Bank of India.

350.Company

Liquidator to

deposit

monies into

scheduled

bank.

(1) Every Company Liquidator of a company shall, in such manner and at such

times as may be prescribed, deposit the monies received by him in his capacity as such in a

scheduled bank to the credit of a special bank account opened by him in that behalf:

Provided that if the Tribunal considers that it is advantageous for the creditors or

contributories or the company, it may permit the account to be opened in such other bank

specified by it.

(2) If any Company Liquidator at any time retains for more than ten days a sum

exceeding five thousand rupees or such other amount as the Tribunal may, on the application

of the Company Liquidator, authorise him to retain, then, unless he explains the retention to

the satisfaction of the Tribunal, he shall—

(a) pay interest on the amount so retained in excess, at the rate of twelve per

cent. per annum and also pay such penalty as may be determined by the Tribunal;

(b) be liable to pay any expenses occasioned by reason of his default; and

consider just and proper, disallowed, or may also be removed from his office.

351.Liquidator not

to deposit

monies into

private

banking

account.

Neither the Official Liquidator nor the Company Liquidator of a company shall

deposit any monies received by him in his capacity as such into any private banking account.

352.Company

Liquidation

Dividend and

Undistributed

Assets

Account.

(1) Where any company is being wound up and the liquidator has in his hands or

under his control any money representing—

(a) dividends payable to any creditor but which had remained unpaid for six

months after the date on which they were declared; or

(b) assets refundable to any contributory which have remained undistributed

for six months after the date on which they become refundable,

the liquidator shall forthwith deposit the said money into a separate special account to be

known as the Company Liquidation Dividend and Undistributed Assets Account maintained

in a scheduled bank.

(2) The liquidator shall, on the dissolution of the company, pay into the Company

Liquidation Dividend and Undistributed Assets Account any money representing unpaid

dividends or undistributed assets in his hands at the date of dissolution.

(3) The liquidator shall, when making any payment referred to in sub-sections (1) and

(2), furnish to the Registrar, a statement in the prescribed form, setting forth, in respect of all

sums included in such payment, the nature of the sums, the names and last known addresses

of the persons entitled to participate therein, the amount to which each is entitled and the

nature of his claim thereto, and such other particulars as may be prescribed.

(4) The liquidator shall be entitled to a receipt from the scheduled bank for any money

paid to it under sub-sections (1) and (2), and such receipt shall be an effectual discharge of

the Company Liquidator in respect thereof.

(5) Where a company is being wound up voluntarily, the Company Liquidator shall,

when filing a statement in pursuance of sub-section (1) of section 348, indicate the sum of

money which is payable under sub-sections (1) and (2) of this section during the six months

preceding the date on which the said statement is prepared, and shall, within fourteen days

of the date of filing the said statement, pay that sum into the Company Liquidation Dividend

and Undistributed Assets Account.

(6) Any person claiming to be entitled to any money paid into the Company Liquidation

Dividend and Undistributed Assets Account, whether paid in pursuance of this section or

under the provisions of any previous company law may apply to the Registrar for payment

thereof, and the Registrar, if satisfied that the person claiming is entitled, may make the

payment to that person of the sum due:

Provided that the Registrar shall settle the claim of such person within a period of sixty

days from the date of receipt of such claim, failing which the Registrar shall make a report to

the Regional Director giving reasons of such failure.

(7) Any money paid into the Company Liquidation Dividend and Undistributed Assets

Account in pursuance of this section, which remains unclaimed thereafter for a period of

fifteen years, shall be transferred to the general revenue account of the Central Government,

but a claim to any money so transferred may be preferred under sub-section (6) and shall be

dealt with as if such transfer had not been made and the order, if any, for payment on the claim

will be treated as an order for refund of revenue.

(8) Any liquidator retaining any money which should have been paid by him into the

Company Liquidation Dividend and Undistributed Assets Account under this section shall—

(a) pay interest on the amount so retained at the rate of twelve per cent. per

annum and also pay such penalty as may be determined by the Registrar:

Provided that the Central Government may in any proper case remit either in part

or in whole the amount of interest which the liquidator is required to pay under this

clause;

(b) be liable to pay any expenses occasioned by reason of his default; and

of his remuneration, as the Tribunal may consider just and proper, to be disallowed,

and to be removed from his office by the Tribunal.

353. Liquidator to

make returns,

etc.

(1) If any Company Liquidator who has made any default in filing, delivering or

making any return, account or other document, or in giving any notice which he is by law

required to file, deliver, make or give, fails to make good the default within fourteen days after

the service on him of a notice requiring him to do so, the Tribunal may, on an application

made to it by any contributory or creditor of the company or by the Registrar, make an order

directing the Company Liquidator to make good the default within such time as may be

specified in the order.

(2) Any order under sub-section (1) may provide that all costs of, and incidental to, the

application shall be borne by the Company Liquidator.

(3) Nothing in this section shall prejudice the operation of any enactment imposing

penalties on a Company Liquidator in respect of any such default as aforesaid.

354. Meetings to

ascertain

wishes of

creditors or

contributories.

(1) In all matters relating to the winding up of a company, the Tribunal may—

(a) have regard to the wishes of creditors or contributories of the company, as

proved to it by any sufficient evidence;

(b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of

the creditors or contributories to be called, held and conducted in such manner as the

Tribunal may direct; and

result thereof to the Tribunal.

(2) While ascertaining the wishes of creditors under sub-section (1), regard shall be

had to the value of each debt of the creditor.

(3) While ascertaining the wishes of contributories under sub-section (1), regard shall

be had to the number of votes which may be cast by each contributory.

355. Court,

tribunal or

person, etc.,

before whom

affidavit may

be sworn.

(1) Any affidavit required to be sworn under the provisions, or for the purposes,

of this Chapter may be sworn—

(a) in India before any court, tribunal, judge or person lawfully authorised to

take and receive affidavits; and

(b) in any other country before any court, judge or person lawfully authorised to

take and receive affidavits in that country or before an Indian diplomatic or consular

officer.

(2) All tribunals, judges, Justices, commissioners and persons acting judicially in India

shall take judicial notice of the seal, stamp or signature, as the case may be, of any such

court, tribunal, judge, person, diplomatic or consular officer, attached, appended or subscribed

to any such affidavit or to any other document to be used for the purposes of this Chapter.

356.Powers of

Tribunal to

declare

dissolution of

company

void.

(1) Where a company has been dissolved, whether in pursuance of this Chapter

or of section 232 or otherwise, the Tribunal may at any time within two years of the date of the

dissolution, on application by the Company Liquidator of the company or by any other

person who appears to the Tribunal to be interested, make an order, upon such terms as the

Tribunal thinks fit, declaring the dissolution to be void, and thereupon such proceedings

may be taken as if the company had not been dissolved.

(2) It shall be the duty of the Company Liquidator or the person on whose application

the order was made, within thirty days after the making of the order or such further time as the

Tribunal may allow, to file a certified copy of the order with the Registrar who shall register

the same, and if the Company Liquidator or the person fails so to do, the Company Liquidator

or the person shall be punishable with fine which may extend to ten thousand rupees for

every day during which the default continues.

357.Commencement

of winding up

by Tribunal.

(1) Where, before the presentation of a petition for the winding up of a company

by the Tribunal, a resolution has been passed by the company for voluntary winding up, the

winding up of the company shall be deemed to have commenced at the time of the passing of

the resolution, and unless the Tribunal, on proof of fraud or mistake, thinks fit to direct

otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been

validly taken.

(2) In any other case, the winding up of a company by the Tribunal shall be deemed to

commence at the time of the presentation of the petition for the winding up.

358.Exclusion of

certain time in

computing

period of

limitation. Notwithstanding anything in the Limitation Act, 1963, or in any other law for the

time being in force, in computing the period of limitation specified for any suit or application in

the name and on behalf of a company which is being wound up by the Tribunal, the period from

the date of commencement of the winding up of the company to a period of one year immediately

following the date of the winding up order shall be excluded.