Section 331 Liabilities and rights of certain persons fraudulently preferred – Companies Act 2013

Amended and updated notes on section 331 of Companies Act 2013. Provisions related to liabilities and rights of certain persons fraudulently preferred.

Amended and updated notes on section 331 of Companies Act 2013. Detail discussion on provisions and rules related to liabilities and rights of certain persons fraudulently preferred.

Chapter XX (Section 270365) of the Companies Act, 2013 (CA 2013) deals with the provisions related to winding up. Section 331 of CA 2013 provides for liabilities and rights of certain persons fraudulently preferred.

Recently, we have discussed in detail section 330 (Certain transfers to be void) of CA 2013. Today, we learn the provisions of section 331 of the Companies Act 2013.

The provisions of section 331 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 331 the Companies Act 2013.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.XX
Chapter NameWinding Up
Section No.331
Section NameLiabilities and rights of certain persons fraudulently preferred
Monthly Updated EditionCompany Law PDF

Section 331 of Companies Act 2013: Liabilities and rights of certain persons fraudulently preferred

Section 331 shall come into force on 15th December, 2016 vide Notification No. S.O. 3677(E) dated 07.12.2016.

(1) Where a company is being wound up and anything made, taken or done after the commencement of this Act is invalid under section 328 as a fraudulent preference of a person interested in property mortgaged or charged to secure the company’s debt, then, without prejudice to any rights or liabilities arising, apart from this provision, the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken to be personally liable as a surety for the debt, to the extent of the mortgage or charge on the property or the value of his interest, whichever is less.

(2) The value of the interest of the person preferred under sub-section (1) shall be determined as at the date of the transaction constituting the fraudulent preference, as if the interest were free of all encumbrances other than those to which the mortgage or charge for the debt of the company was then subject.

(3) On an application made to the Tribunal with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Tribunal shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose, may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid.

(4) The provisions of sub-section (3) shall apply mutatis mutandis in relation to transactions other than payment of money.


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