Sections 335 and 336 of the Companies Act 2013: Attachments, Executions and Offences in Liquidation

Sections 335 and 336 form part of the winding-up provisions of the Companies Act, 2013. Section 335 protects the estate of a company being wound up by the Tribunal from specified attachment, distress, execution and sale proceedings undertaken without the Tribunal's leave. Section 336 deals with specified misconduct by present or former officers of a company in liquidation.

Current statutory context: The winding-up framework of the Companies Act, 2013 was substantially changed by the Insolvency and Bankruptcy Code, 2016. The current India Code text lists Sections 335 and 336 as continuing provisions, while a number of earlier winding-up sections, including Sections 319 to 323 and Section 325, are omitted.

Section 335 - Certain attachments, executions, etc., in winding up by Tribunal to be void

Meaning: Section 335 restricts enforcement against the estate or effects of a company after commencement of winding up by the Tribunal. An attachment, distress, execution or sale covered by the section is void when carried out without leave of the Tribunal. The provision preserves the Tribunal's control over the company's assets during winding up.

Section 335 - Statutory provision

(1) Where any company is being wound up by the Tribunal, -

(a) any attachment, distress or execution put in force, without leave of the Tribunal against the estate or effects of the company, after the commencement of the winding up; or

(b) any sale held, without leave of the Tribunal of any of the properties or effects of the company, after such commencement,

shall be void.

(2) Nothing in this section shall apply to any proceedings for the recovery of any tax or impost or any dues payable to the Government.

Key points under Section 335

  • The section applies where the company is being wound up by the Tribunal.
  • It covers attachment, distress or execution against the company's estate or effects after commencement of winding up.
  • It also covers a sale of the company's property or effects after commencement of winding up.
  • The statutory consequence applies where the action is taken without leave of the Tribunal.
  • Sub-section (2) expressly excludes proceedings for recovery of tax, impost or Government dues.

Section 336 - Offences by officers of companies in liquidation

Meaning: Section 336 imposes criminal consequences for specified acts and omissions connected with the property, books, papers, debts and affairs of a company in liquidation. It applies to a person who is or has been an officer of the company in the circumstances specified by the section.

Section 336 - Acts and omissions covered

(1) The section applies to a person who is or has been an officer of a company which, at the time of the alleged offence, is being wound up by the Tribunal under the Act or is subsequently ordered to be wound up by the Tribunal under the Act.

(a) Failure, to the best of the person's knowledge and belief, fully and truly to disclose to the Company Liquidator all movable and immovable property of the company and the relevant particulars of dispositions, except property disposed of in the ordinary course of business.

(b) Failure to deliver to the Company Liquidator, or as directed, property of the company in the person's custody or control which the person is required by law to deliver.

(c) Failure to deliver to the Company Liquidator, or as directed, books and papers of the company in the person's custody or control which the person is required by law to deliver.

(d) Within the twelve months immediately before commencement of winding up or at any time thereafter, specified conduct including:

(i) concealing company property valued at one thousand rupees or more, or concealing a debt due to or from the company;

(ii) fraudulently removing company property valued at one thousand rupees or more;

(iii) concealing, destroying, mutilating or falsifying, or being privy to such conduct concerning, any book or paper affecting or relating to the property or affairs of the company;

(iv) making, or being privy to making, a false entry in such a book or paper;

(v) fraudulently parting with, altering or making an omission in such a book or paper, or being privy to that conduct;

(vi) by false representation or other fraud, obtaining property on credit for or on behalf of the company which the company does not subsequently pay for;

(vii) under the false pretence that the company is carrying on business, obtaining property on credit for or on behalf of the company which is not subsequently paid for; or

(viii) pawning, pledging or disposing of property obtained on credit and not paid for, unless done in the ordinary course of the company's business.

(e) Making a material omission in a statement relating to the affairs of the company.

(f) Knowing or believing that a false debt has been proved in the winding up and failing for one month to inform the Company Liquidator.

(g) After commencement of winding up, preventing production of a book or paper affecting or relating to the company's property or affairs.

(h) After commencement of winding up, or at a creditors' meeting within the twelve months before commencement, attempting to account for company property by fictitious losses or expenses.

(i) False representation or fraud for obtaining the consent of creditors, or any of them, to an agreement concerning the affairs of the company or its winding up.

Punishment and statutory defence under Section 336(1)

For an offence falling within Section 336(1), the provision prescribes imprisonment for a term of not less than three years and up to five years, together with a fine of not less than one lakh rupees and up to three lakh rupees.

The proviso states that it is a good defence if the accused proves that there was no intent to defraud, conceal the true state of the company's affairs or defeat the law.

Receiving property covered by Section 336(1)(d)(viii)

Section 336(2) separately addresses a person who takes in pawn or pledge, or otherwise receives, property knowing that it was pawned, pledged or disposed of in circumstances amounting to an offence under Section 336(1)(d)(viii). The prescribed punishment is imprisonment for not less than three years and up to five years, with a fine of not less than three lakh rupees and up to five lakh rupees.

Who is an "officer" for Section 336?

The Explanation to Section 336 expands the expression "officer" to include a person in accordance with whose directions or instructions the directors of the company have been accustomed to act.

Effect of the 2016 amendment

The Insolvency and Bankruptcy Code, 2016 amended the winding-up provisions of the Companies Act, 2013. In Section 336(1), the earlier wording covering voluntary winding up was substituted with wording referring to winding up by the Tribunal under the Act, with effect from 15 November 2016. This reflects the transfer of the statutory voluntary liquidation framework to the Insolvency and Bankruptcy Code.

Practical distinction between Sections 335 and 336

Section 335 primarily protects the liquidation estate by controlling post-commencement enforcement and sales without leave of the Tribunal. Section 336, by contrast, is a penal provision directed at misconduct by officers and certain recipients of company property. The two provisions therefore address different risks arising during liquidation: unauthorised action against company assets and improper conduct concerning the company's property, records and affairs.

Official statutory sources

For the latest consolidated legislation, amendments and notifications, readers should verify the text on the official India Code portal and the Ministry of Corporate Affairs portal.

This page is intended as a statutory reference and general legal information. For a particular liquidation, prosecution or enforcement issue, the applicable Act, rules, notifications, orders and case-specific facts should be checked.