Offences by Companies in Liquidation (Section 336 of the Companies Act 2013)

Introduction

This article discusses the offences by Officers of Companies in Liquidation and the discipline set down under Section 336 of the Companies Act, 2013. This section ensures that the liquidation pattern of the association moves along true to form, and the directors don’t forestall the cycle in that frame of mind by committing offences and not giving a genuine image of the resources of the organization.

What is Liquidation?

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Analysis of the Section

• Section 336 of the act, 2013 provides that if any past or present officer commits any offence as stated in clauses (a) to (i), would be subject to penal provisions as provided in sub-section (2) of section 336. The offences described in clauses (a) to (i) have been summarized below:
• The aforesaid officer: (a) does not truly and fully disclose details of all movable and immovable property, doesn’t deliver to liquidator all such parts of movable or immovable property and books and accounts as is his duty to (b) fraudulently or by false representation or under a false pretense that the company is carrying on a business obtains any property on credit which the company subsequently doesn’t pay for or pawns, pledges or disposes of any property obtained on credit and hasn’t been paid for unless it is done so in the ordinary course of business (c) conceals or fraudulently removes any property worth rupees thousand or more or any debt due, conceals, destroys, mutilates or makes a false entry in books of account, etc., within 12 months next before the commencement of winding up (d) makes any material omission or is guilty of any false representation or fraud for obtaining the consent of one or more creditors to an agreement with reference to affairs of the company or winding up.
• Under the Companies Act, 2013, if any person receives any property which is pawned, pledged, or disposed of by the officers of Companies which amounts to an offence, then such person should be given Punishment according to the rules prescribed under the Section 336(2) of the Act. The Punishment to the person receiving property from the Officers of Companies who committed an offence is as follows:
• The person should be punished with imprisonment which should not be less than 3 years and can be extended to 5 years, and
• The person should be punished with a fine that should not be 3 lakh Rupees and can be extended to 5 lakh Rupees.
• An ‘Officer’ includes any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

What are the different Offences by Officers of Companies in Liquidation?

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Situation Before Enactment of Section 336

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Amendment of Section 336

In section 336, in sub-section (1) ,

for the words “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”

the following shall be substituted-

“by the Tribunal under this Act or which is subsequently ordered to be wound up by the Tribunal under this Act”

Case Laws

Ajanta Lucky Scheme and Investments Pvt. Limited v. Dharam Bir Bhalla ( 2000 SCC Online P&H 1210)

In this case, the directors viewed it as not possessing the records expected by the financial liquidator, and the case was documented however court in an earlier company petition arrived at the genuine result that records were given over to the willful liquidator and it was the liquidator who was untraceable for over 16 years. Here the court at long last held that assuming there is no adequate material to lay out the responsibility of the guilty to punish them then, at that point, proceeding against the directors has to be dropped.

What is the Punishment for the Offences by Officers of Companies in Liquidation?

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What is the Punishment to the person who receives the property of the Company?

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Conclusion

This section sets out specific offences and their discipline. These are the offences that an official of an organization commits during liquidation. The officials of the organization should act in good confidence and not deceitfully during liquidation, so a genuine image of the resources and liabilities of the organization can be advanced and every one of the creditors can get their due.

FAQ’s

1. Which section deals with Offences by companies?

India Code: Section Details. [34. Offences by companies.

2. What are the powers and duties of an official liquidation?

Powers and Duties of Liquidators

• to verify claims of all the creditors and consolidate them;
• to take into his custody or control all the assets, property, effects and actionable claims of the corporate debtor;
• to evaluate the assets and property of the corporate debtor in the manner and prepare a report;

3. What are the consequences of liquidation of company?

The company cannot dispose of its assets anymore. -The only business that can be carried out is for purposes of completing the liquidation process. -The company’s director’s power end immediately a liquidator is appointed. -A liquidation marks the dismissal of all employees in the company.

4. What is the legal status of a company in liquidation?

After a company goes into liquidation, unsecured creditors cannot commence or continue legal action against the company, unless the court permits. It is possible for a company in liquidation to also be in receivership.