- Sanskar Garg
Section 333 of Companies Act, 2013: Disclaimer of Onerous Property by Liquidator-Rule 152 to 160
Updated: Oct 4, 2022
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Section 333 of the Company Act of 2013 disclaims onerous property during the company's winding-up process. This provision protects the assets of an insolvent company from further losses and allows the company liquidator to renounce burdensome property. Before or after granting leave to disclaim, the Tribunal may require that such notices be made to those who are interested, as well as impose such terms and circumstances of granting leave as the Tribunal deems appropriate.
Any individual harmed by the execution of a disclaimer is assumed to be a creditor of the entity in the extent of the reimbursement payable in respect of such action and may show the amount as a debt in the winding-up proceedings.
In simpler terms, where any part of the property of a company that is being wound up consists of:
Land of any tenure: Burdened with onerous covenants;
Shares or stocks in companies;
Any other property which can be on sale
the company liquidator may disclaim the property with the permission of the Tribunal and duly signed by him.
What if the company liquidator did not come to know about the existence of any such property? Suppose the company liquidator has not been aware of the fact of any such property within one month of the start of the winding-up. In that case, the power to disclaim the property may be exercised at any time within twelve months of his being aware of it or for a much more extended period as the Tribunal may allow.
The Tribunal may require that such notices be given to persons who are particularly interested before or after granting leave to disclaim and impose such terms and conditions of granting leave as the Tribunal considers appropriate. Any person who claims any interest in any disclaimed property or is subject to any responsibility not released under this act in respect of any disclaimed property may apply to the Tribunal.
In respect of a transaction of an application under this section, rules have been outlined in Companies (Winding-Up), 2020, from Rule 156 to 162.
This is a significant provision for removing the company's hard assets and ensuring that the creditors' interests are protected during the winding-up process.