Section 340: Power of Tribunal to assess damages against delinquent directors, etc
This section allows the Tribunal to hold company directors and managers accountable for mismanaging company assets and to order them to repay money or property.
The section, clause by clause
What the section says
In plain terms
(1)If in the course of winding up of a company, it appears that any person who has taken part in the promotion or formation of the company, or any person, who is or has been a director, manager, Company Liquidator or officer of the company—
The Tribunal can investigate and order someone who was involved in a company's promotion, formation, or management to repay money or property if they misused or mismanaged company assets.
(1)(a)has misapplied, or retained, or become liable or accountable for, any money or property of the company; or
(1)(b)has been guilty of any misfeasance or breach of trust in relation to the company, the Tribunal may, on the application of the Official Liquidator, or the Company Liquidator, or of any creditor or contributory, made within the period specified in that behalf in sub-section (2), inquire into the conduct of the person, director, manager, Company Liquidator or officer aforesaid, and order him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the Tribunal considers just and proper, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the Tribunal considers just and proper.
(2)An application under sub-section (1) shall be made within five years from the date of the winding up order, or of the first appointment of the Company Liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer.
Any application to the Tribunal under this rule must be made within five years from the date of the winding up order, or of the first appointment of the Company Liquidator, or of the misapplication, retainer, misfeasance or breach of trust, whichever is longer.
(3)This section shall apply, notwithstanding that the matter is one for which the person concerned may be criminally liable.
The Tribunal's power to order someone to repay money or property applies even if the person's actions could also lead to criminal charges.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Referred to by
Search the whole Act, or ask it a question, in the interactive browser.
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.