Offenses by officers of companies in liquidation (Section 336,Companies Act 2013)
Updated: Oct 3, 2022
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This article discusses the offenses 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 offenses and not giving a genuine image of the resources of the organization.
Analysis of the Section
Section 336 of the act, 2013 provides that if any past or present officer commits any offense as stated in clauses (a) to (i), would be subject to penal provisions as provided in sub-section (2) of section 336. The offenses 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 offense, 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 offense 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.
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”
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.
This section sets out specific offenses and their discipline. These are the offenses 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.