Amended and updated notes on section 338 of Companies Act 2013. Detail discussion on provisions and rules related to liability where proper accounts not kept.
Chapter XX (Section 270–365) of the Companies Act, 2013 (CA 2013) deals with the provisions related to winding up. Section 338 of CA 2013 provides for liability where proper accounts not kept.
Recently, we have discussed in detail section 337 (Penalty for frauds by officers) of CA 2013. Today, we learn the provisions of section 338 of the Companies Act 2013.
The provisions of section 338 are effective from 15th December, 2016. You may refer Notification No. S.O. 3677(E) issued dated 7-12-2016. In this article, you will learn detail of the provisions of section 338 the Companies Act 2013.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XX |
| Chapter Name | Winding Up |
| Section No. | 338 |
| Section Name | Liability where proper accounts not kept |
| Monthly Updated Edition | Company Law PDF |
Section 338 of Companies Act 2013: Liability where proper accounts not kept
Section 338 shall come into force on 9th September, 2016 to the extent of applicability for section 246 vide Notification No. S.O. 2912(E) issued dated 09.09.2016 and fully applicable from 15th December, 2016 vide Notification No. S.O. 3677(E) dated 07.12.2016.
(1) Where a company is being wound up, if it is shown that proper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with 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.
(2) For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, —
- (a) if such books of account as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day-to-day in sufficient detail of all cash received and all cash paid, have not been kept; and
- (b) where the business of the company has involved dealings in goods, statements of the annual stock takings and, except in the case of goods sold by way of ordinary retail trade, of all goods sold and purchased, showing the goods and the buyers and the sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified, have not been kept.