Sections 331 to 342 of the Companies Act, 2013: Winding Up, Fraud, Liability and Prosecution

Sections 331 to 342 form a connected group of winding-up provisions under the Companies Act, 2013. They deal with fraudulent preferences, floating charges, onerous property, post-commencement transfers, attachments and executions, offences and fraud by officers, failure to keep proper accounts, fraudulent conduct of business, assessment of damages, extension of liability to partners or directors, and prosecution of delinquent officers and members.

Overview of Sections 331 to 342

The provisions should be read together with the wider winding-up framework of the Companies Act, 2013 and, where applicable, the Insolvency and Bankruptcy Code, 2016. The following is an article-style explanation of each provision; the official statutory text should be checked for the precise conditions, exceptions, limitation periods and amendments.

Section 331 - Liabilities and rights of certain persons fraudulently preferred

Deals with the liabilities and corresponding rights of a person who has received a fraudulent preference, including where mortgaged or charged property secures a company debt.

Section 332 - Effect of floating charge

Addresses when a floating charge created within the statutory period before commencement of winding up may be invalid, subject to the conditions and exceptions stated in the Act.

Section 333 - Disclaimer of onerous property

Provides the statutory mechanism by which onerous property of a company in winding up may be disclaimed, subject to the Tribunal and the rights of affected persons.

Section 334 - Transfers, etc., after commencement of winding up to be void

Provides for the treatment of dispositions of company property and transfers of shares or alteration in member status made after commencement of winding up, subject to the statutory exception.

Section 335 - Certain attachments, executions, etc., in winding up by Tribunal to be void

Deals with certain attachments, distress or execution put in force against the estate or effects of a company after commencement of winding up by the Tribunal.

Section 336 - Offences by officers of companies in liquidation

Specifies offences and consequences concerning conduct of officers of a company that is being wound up, including specified failures, concealment and other prohibited conduct.

Section 337 - Penalty for frauds by officers

Addresses specified fraudulent acts by officers in relation to the company and provides the statutory consequences for such conduct.

Section 338 - Liability where proper accounts not kept

Deals with responsibility arising where proper books of account were not kept during the relevant period before winding up, subject to the statutory defence.

Section 339 - Liability for fraudulent conduct of business

Empowers the Tribunal, where business has been carried on with intent to defraud creditors or for a fraudulent purpose, to impose personal responsibility in accordance with the section. Knowing participation also attracts the consequences specified by the Act.

Section 340 - Power of Tribunal to assess damages against delinquent directors, etc.

Allows the Tribunal in winding up to inquire into specified misapplication, retention, misfeasance or breach of trust and, where the statutory conditions are met, order repayment, restoration or contribution by way of compensation.

Section 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 concerns a firm or body corporate, the Tribunal may extend the corresponding declaration or order to a person who was a partner or director at the relevant time.

Section 342 - Prosecution of delinquent officers and members of company

Where, during winding up by the Tribunal, it appears that an officer or member has committed an offence in relation to the company, the Tribunal may direct the liquidator to prosecute or refer the matter to the Registrar. The section must be read with later statutory omissions.

Important legislative context

The winding-up chapter was materially affected by the Insolvency and Bankruptcy Code, 2016 and subsequent Companies Act amendments. In particular, section 342 should be read in its amended form: sub-sections (2), (3) and (4) were omitted with effect from 15 November 2016, and sub-section (6) was omitted with effect from 21 December 2020. Section 327 also expressly addresses the non-application of sections 326 and 327 in liquidation under the Insolvency and Bankruptcy Code, 2016.

How Sections 331 to 342 fit together

Sections 331 to 335 principally address transactions, property and enforcement consequences connected with winding up. Sections 336 to 338 focus on misconduct by officers and accounting failures. Sections 339 to 341 concern fraudulent business conduct, compensatory or restorative orders and extension of liability. Section 342 provides the prosecution mechanism where an offence in relation to the company appears during winding up by the Tribunal.

Official statutory resources

For authoritative text and amendments, refer to the India Code portal and the Ministry of Corporate Affairs portal. These official resources should be checked before relying on a provision for a proceeding, opinion or filing.

Last reviewed: 17 September 2026. This page is an explanatory legal resource and does not replace the official statutory text, applicable rules, notifications or judicial decisions.