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Section 240: Liability of officers in respect of offences committed prior to merger, amalgamation, etc

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Act 2013
Section 239 All 470 Sections of Companies Act Section 241
Statutory Defined Terms in this Section: (Click any term for official legal definition)
Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 240

Section 240 of the Companies Act, 2013 establishes the statutory survival of penal liability, providing that the criminal liability of directors and officers for offenses committed prior to a merger, amalgamation, insolvency, liquidation, or dissolution remains fully enforceable.

  • Non-Obstante Survival of Pre-Restructuring Liability: Provides a non-obstante statutory mandate ensuring that liability for criminal offenses committed prior to merger, acquisition, insolvency, or dissolution is not extinguished.
  • Survival Across Corporate Dissolution and Liquidation: Ensures that corporate death, formal dissolution, or winding up of the corporate entity does not abate or extinguish the personal penal liability of delinquent fiduciaries.
  • Continued Prosecution and Punishment of Officers: Explicitly declares that culpable directors, managers, and officers in default continue to be liable to be prosecuted, tried, and punished for prior corporate crimes.
Key Landmark Precedents:
  • Manish Kumar v. Union of India, (2021) 5 SCC 1: The Supreme Court examined Section 32A of the IBC alongside corporate penal liabilities, affirming that while the corporate debtor may receive immunity post-resolution, individual directors and officers who committed offenses prior to restructuring remain fully liable for prosecution under Section 240.
  • P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., (2021) 6 SCC 258: The Supreme Court held that statutory moratoria or corporate restructuring protect only the corporate debtor, whereas natural persons, promoter-directors, and officers in default remain personally liable for prior offenses without statutory abatement.
  • Kalyanpur Lime Works Ltd. v. State of Bihar, AIR 1954 SC 165: Established the enduring principle that dissolution or corporate restructuring cannot operate as a release or discharge of personal tortious or criminal liabilities incurred by individuals during the management of the company.
Courtroom Practice & Strategic Litigation Guidance:

When defending former directors of an amalgamated or dissolved company against criminal prosecution under the Companies Act or IPC/BNS, do not rely on corporate dissolution as a defense to abate criminal proceedings. Instead, focus the defense on the absence of personal attribution and lack of individual mens rea under Section 2(60) (officer who is in default), because Section 240 statutorily preserves criminal liability notwithstanding corporate demise.

Section 239 All 470 Sections of Companies Act Section 241