Sections 333 and 334 of the Companies Act, 2013: Disclaimer of Onerous Property and Transfers After Commencement of Winding Up
Sections 333 and 334 form part of the winding-up provisions of the Companies Act, 2013. Section 333 deals with the power of the Company Liquidator, with leave of the Tribunal, to disclaim certain burdensome property or contracts. Section 334 deals with dispositions of company property, transfers of shares and alterations in membership status after commencement of winding up by the Tribunal.
Section 333 - Disclaimer of onerous property
Meaning: "Onerous property" in this context refers to property or contractual obligations that impose burdens, continuing liabilities or costs on a company in winding up, including the categories specifically identified in Section 333(1). The provision enables the Company Liquidator, subject to leave of the Tribunal and the statutory safeguards, to disclaim such property.
Section 333(1): Property that may be disclaimed
Where any part of the property of a company being wound up consists of land burdened with onerous covenants, shares or stocks in companies, property that is not saleable or readily saleable because its possessor is bound to perform an onerous act or pay money, or an unprofitable contract, the Company Liquidator may seek leave of the Tribunal to disclaim it in writing.
The statutory period is generally twelve months after commencement of winding up, or such extended period as the Tribunal may allow. Where the Company Liquidator did not become aware of the property within one month from commencement of winding up, the twelve-month period runs from the time the Liquidator became aware of it, subject to any extension allowed by the Tribunal.
Section 333(2): Effect of disclaimer
From the date of disclaimer, the company's rights, interests and liabilities in or in respect of the disclaimed property are determined. Rights, interests or liabilities of other persons are affected only so far as necessary to release the company and its property from liability.
Section 333(3): Tribunal safeguards
Before or while granting leave to disclaim, the Tribunal may require notice to interested persons, impose conditions and make such orders as it considers just and proper.
Section 333(4): Request requiring the Liquidator to decide
An interested person may require the Company Liquidator in writing to decide whether the property will be disclaimed. If the Liquidator does not, within twenty-eight days after receipt of the application or such extended period as the Tribunal allows, give notice of an intention to seek leave to disclaim, the statutory consequences in sub-section (4) apply. In the case of a contract, failure to disclaim within the prescribed or extended period after such an application results in the contract being deemed adopted.
Section 333(5): Rescission of contracts
On application by a person entitled to the benefit of, or subject to the burden of, a contract made with the company, the Tribunal may rescind the contract on terms it considers just and proper. Damages payable under such an order may be proved as a debt in the winding up.
Section 333(6): Vesting or delivery of disclaimed property
The Tribunal may, on application by a person claiming an interest in disclaimed property or remaining under a relevant liability, order the property to vest in or be delivered to an entitled person, a person to whom delivery appears just by way of compensation, or a trustee for that person, on appropriate terms. Special conditions apply to leasehold property and persons claiming under the company.
Section 333(7): Claim as creditor
A person affected by a disclaimer is deemed to be a creditor of the company to the amount of compensation or damages payable because of the disclaimer and may prove that amount as a debt in the winding up.
Section 334 - Transfers after commencement of winding up to be void
Meaning: Section 334 protects the company's estate after winding up by the Tribunal has commenced. It prevents post-commencement dealings from changing the company's property or membership position unless the Tribunal orders otherwise.
In a winding up by the Tribunal, any disposition of company property, including actionable claims, any transfer of shares in the company, or any alteration in the status of its members made after commencement of winding up is void unless the Tribunal otherwise orders.
Practical distinction between Sections 333 and 334
Section 333 concerns the Liquidator's controlled power to free the company from specified burdensome property or contracts, subject to Tribunal supervision and protection of affected persons. Section 334 instead addresses transactions or changes occurring after commencement of winding up by the Tribunal and makes them void unless the Tribunal orders otherwise.
Amendment note for Section 334
Section 334 was substituted by the Insolvency and Bankruptcy Code, 2016 through section 255 and the Eleventh Schedule, with effect from 15 November 2016. The earlier distinction involving voluntary winding up was removed from this Companies Act provision. Voluntary liquidation of corporate persons is now principally dealt with under the Insolvency and Bankruptcy Code, 2016 and the regulations made under it.
Official legal resources
For the authoritative statutory text and subsequent amendments, refer to the Ministry of Corporate Affairs and the Insolvency and Bankruptcy Board of India. The Act should be read with applicable rules, notifications, orders and amendments in force on the relevant date.
This article is a general legal reference and does not substitute for the official statutory text or case-specific professional advice.