Divija Pidugu, BA LLB (Hons), Damodaram Sanjivayya National Law University, Vishakhapatnam
ABSTRACT
Whenever a company is winding up, certain transactions are to be avoided otherwise it will affect the financial position of the company. These transactions may be called avoidable transactions or fraudulent transactions.
In administering a winding up company’s estate or assets, the official liquidator will examine transactions in which the company was involved before the onset of winding up proceedings, to ascertain whether any of the company's property or assets that should be available for distribution among all creditors were disposed of improperly. These transactions may usually be contested with the aim of reclaiming those assets from the recipient or beneficiary for the benefit of the creditors as a group. Hence the notion of avoidable transactions or fraudulent transactions. Such protective provisions assume particular importance in the Indian context, where companies are often closely held by promoter groups who may seek to transfer value from assets through opaque structures to other group companies for their own benefit. Accordingly, section 328 to 331, section 334 and section 335 are incorporated in the Companies Act, 2013 to deal with any such transaction and to protect the interests of creditors and other stakeholders. In this article, it is therefore intended by author to provide an analysis of the law that regulates transactions entered into by the company prior to commencement of winding up proceedings and certain other transactions after commencement of winding up proceedings under the Companies Act, 2013. The author concludes by suggesting amendments required in the sections to make the protection envisaged by the section way more effective in the real sense.
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