Liquidator Duty to Deposit Monies: Sections 350, 351

The liquidator duty to deposit monies is written as a pair: one section says where the money goes, the next says where it may never go. Section 350 of the Companies Act, 2013 sends a Company Liquidator's receipts into a special account at a scheduled bank and prices the delay in keeping them out. Section 351 bars both the Official Liquidator and the Company Liquidator from any private banking account.

What is the liquidator duty to deposit monies under section 350?

A named account at a named class of bank. Section 350(1) states that Every Company Liquidator of a company shall, in such manner and at such times as may be prescribed, deposit the monies received by him in his capacity as such in a scheduled bank to the credit of a special bank account opened by him in that behalf.

Three specifics are fixed by the sub-section, and two are left to rules. The bank must be a scheduled bank. The account must be a special bank account. The account must be opened by the liquidator himself in that behalf. The manner and the times are as may be prescribed.

The proviso supplies the only alternative: Provided that if the Tribunal considers that it is advantageous for the creditors or contributories or the company, it may permit the account to be opened in such other bank specified by it. Three beneficiaries are named as the test, and the Tribunal has to specify the substitute bank rather than leave the choice open.

What does it cost to hold money back?

Interest, a penalty, expenses, and the office itself. Section 350(2) applies If any Company Liquidator at any time retains for more than ten days a sum exceeding five thousand rupees or such other amount as the Tribunal may, on the application of the Company Liquidator, authorise him to retain. Unless he explains the retention to the satisfaction of the Tribunal, three consequences follow:

1. (a) pay interest on the amount so retained in excess, at the rate of twelve per cent. per annum and also pay such penalty as may be determined by the Tribunal.
2. (b) be liable to pay any expenses occasioned by reason of his default.
3. (c) also be liable to have all or such part of his remuneration, as the Tribunal may consider just and proper, disallowed, or may also be removed from his office.

Two features of that structure are worth separating. The interest runs on the amount so retained in excess, not on the whole sum held, so the threshold is also the measuring line. And the explanation route is real: the consequences bite unless he explains the retention to the satisfaction of the Tribunal, which makes the default rebuttable rather than strict.

What does section 351 add?

A flat prohibition covering both offices. Section 351 is one sentence: Neither the Official Liquidator nor the Company Liquidator of a company shall deposit any monies received by him in his capacity as such into any private banking account.

It is wider than section 350 in who it binds and narrower in what it addresses. Section 350 speaks only to the Company Liquidator; section 351 names the Official Liquidator too, whose separate payment obligation sits in section 349, requiring every Official Liquidator to pay monies received as such into the public account of India in the Reserve Bank of India. Section 351 carries no proviso, no threshold and no explanation route.

How does this sit with the rest of the money machinery?

It is the first of two deposit duties, and they price default the same way. Section 352 requires unpaid dividends and undistributed assets to be moved into the Company Liquidation Dividend and Undistributed Assets Account, and section 352(8) charges a retaining liquidator interest at twelve per cent. per annum, the same rate section 350(2)(a) uses, with the penalty there determined by the Registrar rather than the Tribunal. That account is covered in the Company Liquidation Dividend and Undistributed Assets Account.

Both duties attach to the office rather than to the person, so they run from the appointment made under section 275, covered in what a Company Liquidator is, and they sit alongside the powers exercised under section 290, covered in the powers of a Company Liquidator. Where the winding up runs long, the same money has to be accounted for again in the periodic statement under information as to pending liquidations. The liquidator duty to deposit monies is the plainest of those obligations, and section 350(2) is the one that puts a rate on ignoring it.

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.