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Section 246: Application of certain provisions to proceedings under section 241 or section 245

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Act 2013
Section 245 All 470 Sections of Companies Act Section 247
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 246

Section 246 of the Companies Act, 2013 applies the penal and civil misfeasance provisions of Sections 337 to 341 mutatis mutandis to oppression and mismanagement petitions under Section 241 and class action suits under Section 245, arming the Tribunal with sweeping investigative, veil-piercing, and restitutionary powers over ongoing enterprises.

  • Incorporation of Winding-Up Misfeasance Powers: Transposes Sections 337 to 341 into Section 241 and 245 proceedings, enabling the Tribunal to penalize officer frauds and improper accounting without requiring the company to be placed in liquidation.
  • Personal Unlimited Liability for Fraudulent Trading (Section 339): Empowers the NCLT under Section 246 to declare that any persons knowingly carrying on corporate business with intent to defraud creditors or members are personally liable without limitation for all debts and liabilities.
  • Summary Restitution and Assessment of Damages (Section 340): Authorizes the Tribunal to investigate delinquent promoters, directors, or managers for misfeasance, breach of trust, or wrongful retention of corporate property, directing personal repayment with commercial interest.
Key Landmark Precedents:
  • Official Liquidator, Supreme Bank Ltd. v. P.A. Tendolkar, (1973) 1 SCC 602: The Supreme Court laid down the authoritative principles governing misfeasance proceedings against directors, holding that gross negligence, breach of fiduciary duty, or willful blindness to corporate siphoning attracts personal liability to restore misappropriated assets.
  • Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314: Held that proceedings under oppression provisions partake of wide equitable powers akin to winding up, and importing misfeasance principles ensures controllers cannot hide behind the corporate veil to evade restitutionary accountability.
  • Subrata Roy Sahara v. Union of India, (2014) 8 SCC 470: Affirmed the inherent statutory authority of company law tribunals to pierce the corporate veil, trace siphoned capital, and hold controlling directors personally liable for fraudulent investor schemes.
Courtroom Practice & Strategic Litigation Guidance:

Petitioners in Section 241/245 matters should plead a dedicated misfeasance count under Section 246 read with Sections 339 and 340, supported by independent forensic audit findings. Seek ex parte interim orders freezing the personal bank accounts and immovable properties of delinquent directors to secure future restitution before the corporate assets are stripped.

Section 245 All 470 Sections of Companies Act Section 247