How to Inspect Company Books in Winding Up: S. 346
To inspect company books in winding up you have to be one of two people, wait for one event, and work within rules the section itself does not contain. Section 346 of the Companies Act, 2013 gives creditors and contributories a right of inspection after a winding up order is made, and then makes that right conditional on prescribed rules. Sub-section (2) protects government powers from being read down by it.
Definition
Inspection of company books in a winding up
is the right section 346 of the Companies Act, 2013 gives to a creditor or contributory. At any time after a winding up order is made by the Tribunal, either may inspect the books and papers of the company, but only in accordance with and subject to such rules as may be prescribed. Source: Companies Act, 2013, section 346.
Who may inspect company books in winding up, and from when?
Creditors and contributories, once the order exists. Section 346(1) states that At any time after the making of an order for the winding up of a company by the Tribunal, any creditor or contributory of the company may inspect the books and papers of the company only in accordance with, and subject to such rules as may be prescribed.
Three conditions are packed into that sentence, and each narrows the last:
- The event. Inspection runs from the making of an order for the winding up of a company by the Tribunal, so the trigger is the order itself, not the petition and not the appointment of a provisional liquidator before it.
- The class. The right belongs to any creditor or contributory of the company. Both classes are named, and no other person is.
- The measure. Inspection is permitted only in accordance with, and subject to such rules as may be prescribed. The word only is in the sub-section, so the prescribed rules define the right rather than sit beside it.
What does section 346 not do?
It does not touch anyone else's powers. Section 346(2) states that Nothing contained in sub-section (1) shall exclude or restrict any rights conferred by any law for the time being in force on three categories: (a) on the Central Government or a State Government; (b) on any authority or officer thereof; or (c) on any person acting under the authority of any such Government or of any such authority or officer.
That saving is broad in two directions. It covers rights under any law for the time being in force, not only rights under the Companies Act, and it reaches down to a person acting under the authority of an officer of a Government. So the restriction in sub-section (1) is a restriction on creditors and contributories, not a general shutter over the books.
Creditors and contributories only
The two classes section 346(1) of the Companies Act, 2013 permits to inspect the books and papers of a company after a winding up order is made by the Tribunal, in accordance with and subject to such rules as may be prescribed
Source: Companies Act, 2013, section 346(1)
How does inspection sit against the other book provisions?
Section 346 is the access rule in a group of four that deal with the same records from different angles.
| Section | Question it answers |
|---|---|
| 345 | What the books prove, as between contributories |
| 346 | Who may look at them, and on what terms |
| 347 | How they are disposed of, and for how long anyone is answerable for them |
| 348 | What has to be filed about the liquidation while it is still running |
Access and proof are separate. A contributory who obtains inspection under section 346 is then reading records that section 345 makes prima facie evidence between contributories, covered in company books as evidence in a winding up. Access and survival are separate too: section 347(2) sets a five year point after dissolution beyond which no responsibility devolves for a book not being forthcoming, covered in the disposal of company books.
What should a creditor check before asking to inspect?
Four things, in this order. Whether a winding up order has actually been made by the Tribunal, since section 346(1) is keyed to it. Whether the applicant is a creditor or a contributory, since no third class is named. What the prescribed rules require, since inspection is permitted only in accordance with them. And whether the applicant has a separate right under another law, since section 346(2) preserves rights conferred by any law for the time being in force on the Governments, their authorities and officers, and persons acting under them.
Books are also not the only visible signal that a company is in liquidation. Section 344 requires the company's invoices, orders for goods and business letters to carry a statement that the company is being wound up, covered in the statement on trading paperwork, which reaches counterparties who will never ask to inspect anything. To inspect company books in winding up is the deeper route, and it is the one the section hedges most tightly.
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Frequently asked questions
Who may inspect the books of a company in winding up?
Any creditor or contributory of the company, under section 346(1), at any time after the making of an order for the winding up of a company by the Tribunal. The right is given to those two classes and the sub-section names no others. Source: Companies Act, 2013, section 346(1).
When does the right of inspection start?
At any time after the making of an order for the winding up of a company by the Tribunal, under section 346(1). The sub-section is keyed to the making of the order, so it does not by its terms give inspection rights during the period before the order is made. Source: Companies Act, 2013, section 346(1).
Is the right of inspection unrestricted?
No. Section 346(1) allows a creditor or contributory to inspect the books and papers of the company only in accordance with, and subject to such rules as may be prescribed. The word only sits in the sub-section, so the prescribed rules are the measure of the right rather than a procedure alongside it. Source: Companies Act, 2013, section 346(1).
Does section 346 cut down government inspection powers?
No. Section 346(2) states that nothing in sub-section (1) shall exclude or restrict any rights conferred by any law for the time being in force on the Central Government or a State Government, on any authority or officer thereof, or on any person acting under the authority of any such Government or of any such authority or officer. Source: Companies Act, 2013, section 346(2).
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