Liability for fraudulent conduct of business
Section 339 of the Companies Act, 2013 deals with liability for fraudulent conduct of business. If in the course of the winding up of a company, it appears that any business of the company has been carried on with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal, on the application of the Official Liquidator, or the Company Liquidator The Act came into force on 01 Apr 2014.
(1) If in the course of the winding up of a company, it appears that any business of the company has been carried on with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal, on the application of the Official Liquidator, or the Company Liquidator or any creditor or contributory of the company, may, if it thinks it proper so to do, declare that any person, who is or has been a director, manager, or officer of the company or any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Tribunal may direct:
Provided that on the hearing of an application under this sub-section, the Official Liquidator or the Company Liquidator, as the case may be, may himself give evidence or call witnesses.
(2) Where the Tribunal makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration and, in particular,--
(a) make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf;
(b) make such further order as may be necessary for the purpose of enforcing any charge imposed under this sub-section.
(3) Where any business of a company is carried on with such intent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be liable for action under section 447.
(4) This section shall apply, notwithstanding that the person concerned may be punishable under any other law for the time being in force in respect of the matters on the ground of which the declaration is to be made.
Explanation.-- For the purposes of this section,--
(a) the expression "assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration, not including consideration by way of marriage, given in good faith and without notice of any of the matters on the ground of which the declaration is made;
(b) the expression "officer" includes any person in accordance with whose directions or instructions the directors of the company have been accustomed to act.
Section 339, The Companies Act, 2013 (Act 18 of 2013).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Usha Ananthasubramanian vs Union of India
Court's Decision & Legal Precedent
The powers conferred on the National Company Law Tribunal under Sections 337 and 339 of the Companies Act, 2013, in the context of Section 241 proceedings for oppression and mismanagement, are limited to the specific company in which acts of mismanagement or fraudulent conduct are alleged. These powers cannot be exercised to freeze assets of or impose liability on a person who is an officer or head of another organization, unless that person was directly and knowingly party to the carrying on of the fraudulent business of the company in question. The jurisdiction of the NCLT is circumscribed by the company in relation to which the application is made, and cannot extend to other corporate entities or their officers merely because they may have failed to prevent fraud.
On this section: Provides liability for fraudulent conduct of business. The Court held that this section applies only to persons knowingly party to the carrying on of the business of the specific company being mismanaged, not to officers of other entities.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… On 15th July, 2022, the Central Government issued directions directing the SFIO to initiate proceedings against the Petitioner and his son, Mr. Shiv Punj, under Sections 241 and 242 read with Sections 246 and 339 of the Companies Act, 2013. 3.11. Aggrieved by directions issued by the Central Government, on 25th September, 2023, the Petitioner preferred W.P.(Crl) 2847/2023[9]( page-4-0) inter alia seeking quashing of letters dated 22nd May, 2019 and 15th July, 2022. This Court vide order dated 31st October, 2023 …
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… JUSTICE TUSHAR RAO GEDELA O R D E R % 15.07.2024 1. Present appeals have been filed challenging the order dated 31st May 2024 passed by learned Single Judge in W.P.(C) 8239/2024 whereby the disgorgement proceedings filed by the Union of India under Section 241(2) read with Sections 246 and 339 of the Companies Act, 2013 before the NCLT in CP 105/241/PB/2023 have been stayed and it has further been clarified that NCLT may continue with the proceedings already listed on 6th June 2024 so long as they are not in conflict with the impugned order. The appellants also pray for continuance of proceedings pending …
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… Plaintiff would contend that the principle embodied in this provision can be used by a civil Court, this Court considers it is not permissible since the Company has an independent juristic existence and its liability cannot be telescoped through its Directors unless it becomes essential in circumstances embodied in Section 339 of the Companies Act, 2013. And, today this provision admittedly is not notified and also that the first Defendant Company does not face any liquidation. A.A.NAKKIRAN, J. Srcm 9. In conclusion, this application is allowed and names of the Applicants/Defendants 3 and 5 are …
Questions about Section 339
What have the courts held on Section 339 of the Companies Act?
Usha Ananthasubramanian vs Union of India (12 Feb 2020) is the leading judgment on this section among those set out below: Provides liability for fraudulent conduct of business. The Court held that this section applies only to persons knowingly party to the carrying on of the business of the specific company being mismanaged, not to officers of other entities.
How do I find court cases under Section 339 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 339, section 339 Companies Act, section 339 of the Companies Act. People searching for it also type companies act 2013 section 339. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with Usha Ananthasubramanian vs Union of India (12 Feb 2020).
What should I read with Section 339 of the Companies Act, and has it changed?
Its own text turns on section 447 (Punishment for fraud), so none of them can safely be read on its own. 2 other provisions in this corpus refer back to it.
When did Section 339 of the Companies Act come into force?
Section 339 of the Companies Act, cited as Companies Act 339, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.