What is Liability for fraudulent conduct of business? What is Power of Tribunal to assess damages against delinquent directors, etc? Section 339 and 340 of Indian Companies Act 2013

Liability for fraudulent conduct of business and Power of Tribunal to assess damages against delinquent directors, etc are defined under Section 339  and 340 of Indian Companies Act 2013. Provisions under these Sections are:

Section 339 of Indian Companies Act 2013 "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.

Section 340 of Indian Companies Act 2013 "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.

What is Arrangement when binding on company and creditors? What is Power to apply to Tribunal to have questions determined, etc? Section 321 and 322 of Indian Companies Act 2013

What is Costs of voluntary winding up? Is Debts of all descriptions to be admitted to proof?Section 323 and 324 of Indian Companies Act 2013

What is Application of insolvency rules in winding up of insolvent companies? What is Overriding preferential payments? Section 325 and 326 of Indian Companies Act 2013

What is Preferential payments? What is Fraudulent preference? Section 327 and 328 of Indian Companies Act 2013

What is Transfers not in good faith to be void? Certain transfers to be void. Section 329 and 330 of Indian Companies Act 2013

What is Liabilities and rights of certain persons fraudulently preferred? What is effect of floating charge? Section 331 and 332 of Indian Companies Act 2013

What is Disclaimer of onerous property? Is Transfers, etc., after commencement of winding up to be void? Section 333 and 334 of Indian Companies Act 2013

What is certain attachments, executions, etc., in winding up by Tribunal to be void? What are Offences by officers of companies in liquidation? Section 335 and 336 of Indian Companies Act 2013

What is Penalty for frauds by officers? What is Liability where proper accounts not kept? Section 337 and 338 of Indian Companies Act 2013

What is Liability for fraudulent conduct of business? What is Power of Tribunal to assess damages against delinquent directors, etc? Section 339 and 340 of Indian Companies Act 2013

 

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