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Section 338 Of The Companies Act 2013: Liability Where Proper Accounts Not Kept

SECTION-338 (Liability where proper accounts not kept) under CHAPTER-XX (Winding Up) of the Companies Act, 2013

(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.







Extra Notes for Readers

(1) The Companies Act, 2013 received the assent of the President on the 29th August, 2013 (Published in the Gazette of India, Extraordinary, Part II - Section 1 by Ministry of Law and Justice, Legislative Department on 30th August, 2013) - link


(2) Section 338 of the Companies Act 2013 was notified by MCA Notification S.O. 3677(E) dated 7th December 2016 (w.e.f. 15th December 2016) - link

(3) Section 338 of the Companies Act 2013 was notified (to the extent of their applicability for section 246) by MCA Notification S.O. 2912(E) dated 9th September, 2016 - link

(4) The Companies (Winding Up) Rules, 2013 is yet to be notified.









This page was last updated on 6th May, 2017.

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