Offences by Officers in Liquidation: S. 336

Offences by officers in liquidation are set out in section 336 of the Companies Act, 2013 as a list of nine acts and omissions, punishable with a minimum of three years. Section 337 sits beside it with a narrower list aimed at creditors and a lower minimum. Both were narrowed in 2016 to winding up by the Tribunal. This page reads both sections as printed.

What are offences by officers in liquidation, and who can commit them?

A person who is or has been an officer of the company, which reaches past office holders as well as sitting ones. The company itself must, at the time of the commission of the alleged offence, be being wound up by the Tribunal under this Act or which is subsequently ordered to be wound up by the Tribunal under this Act.

Those bracketed words are substituted text. The footnote records that they replaced 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, by Act 31 of 2016, section 255 and the Eleventh Schedule, with effect from 15 November 2016. The voluntary winding up limb went with the rest of Chapter XX Part II, and what remains is the Tribunal route described in the grounds for winding up by the Tribunal.

The Explanation widens officer beyond the register: it includes any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

What acts are listed?

Nine clauses, (a) to (i), and clause (d) splits into eight sub-clauses of its own.

Clauses (a) to (c) are the disclosure and delivery limbs, and each is qualified. Clause (a) is measured to the best of his knowledge and belief, and excepts property disposed of in the ordinary course of the business of the company. Clauses (b) and (c) bite only on property, books and papers which he is required by law to deliver up.

Clause (d) carries a money threshold on two of its sub-clauses. Concealing any part of the property to the value of one thousand rupees or more, or concealing any debt due to or from the company, falls under sub-clause (i); fraudulently removing property to the value of one thousand rupees or more falls under sub-clause (ii). The remaining sub-clauses, covering concealment or falsification of books, false entries, fraudulent parting with books, obtaining property on credit by false representation or false pretence, and pawning property obtained on credit, carry no stated value.

What is the punishment, and is there a defence?

Section 336(1) sets imprisonment for a term which shall not be less than three years but which may extend to five years and with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees.

The proviso gives a defence, and it is the accused who has to make it out: it shall be a good defence if the accused proves that he had no intent to defraud or to conceal the true state of affairs of the company or to defeat the law. Three intents are named, and the defence requires the absence of all of them.

Section 336(2) reaches the other side of one transaction. Where a person pawns, pledges or disposes of property in circumstances amounting to an offence under sub-clause (viii) of clause (d) of sub-section (1), every person who takes in pawn or pledge or otherwise receives the property, knowing it to be pawned, pledged, or disposed of in such circumstances is punishable with the same three to five years, but with fine which shall not be less than three lakh rupees but which may extend to five lakh rupees. The receiver's fine floor and ceiling are both higher than the officer's.

What does section 337 add?

A narrower offence, with a lower minimum sentence. It applies to a person being at the time of the commission of the alleged offence an officer of a company which is subsequently ordered to be wound up by the Tribunal, followed by the bracketed words under this Act, which replaced or which subsequently passes a resolution for voluntary winding up, by the same 2016 provision.

Three acts are listed, all directed at creditors: inducing a person to give credit to the company by false pretences or by means of any other fraud; making or causing a gift, transfer or charge, or conniving at an execution being levied, with intent to defraud creditors of the company or any other person; and concealing or removing property with intent to defraud creditors of the company, since the date of an unsatisfied judgment or order for payment against the company or within two months before that date.

The punishment is imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees. The fine range matches section 336(1); the custodial range is two years lower at both ends, and section 337 has no proviso offering a good defence.

Both sections are criminal provisions against individuals. The separate civil route, by which a Tribunal declares a person personally responsible for the company's debts, runs through fraudulent conduct of business, and the fraud definition those sections feed is fraud under section 447.

Reading offences by officers in liquidation therefore means checking three things: that the winding up is by the Tribunal, since 2016 left nothing else in the section; which clause the conduct falls under, because clause (d) carries a value threshold the others do not; and whether the accused can carry the proviso, which is the only defence section 336 prints.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.