Home  /  Companies Act  /  Section 324

Section 324: Debts of all descriptions to be admitted to proof

Companies Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2013
Section 323 All 470 Sections of Companies Act Section 325
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 324

Section 324 of the Companies Act, 2013 mandates that in every winding up, all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the company, subject to a just estimation of contingent liabilities.

  • Universal Admissibility of Claims: Comprehends liquidated debts, unliquidated claims, future obligations, and claims sounding strictly in tortious or contractual damages, ensuring no bona fide creditor is shut out from liquidation distribution.
  • Just Valuation of Contingent Liabilities: Mandates that where a debt or claim does not bear a certain value, the Company Liquidator or Tribunal must make a fair and just estimate of its present value as of the winding up date.
  • Formal Proof of Debt Framework: Governed procedurally by the Companies (Winding Up) Rules, requiring creditors to submit formal proof of debt supported by affidavit, vouchers, and accounts, which the Liquidator must admit, reduce, or reject in writing.
Key Landmark Precedents:
  • J.K. (Bombay) Pvt. Ltd. v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd., AIR 1970 SC 1041: The Supreme Court held that once a winding up order is made, the assets of the company are held in statutory trust for creditors whose debts are provable under the Act, and proof must be determined as of the date of the winding up order.
  • Official Liquidator v. Parthasarathi Sinha, (1983) 1 SCC 538: Affirmed that liabilities provable in winding up encompass actionable misfeasance claims, damages for breach of trust, and unliquidated contractual claims capable of equitable monetary assessment.
  • Re: Kentwood Constructions Ltd., [1960] 2 All ER 655: Established that a contingent claim must be given a real and genuine commercial estimate by the liquidator; if the contingency resolves prior to distribution, the actual quantified figure replaces the estimate.
Courtroom Practice & Strategic Litigation Guidance:

Creditors submitting unliquidated or contingent claims before the Company Liquidator under Section 324 must accompany Form WIN 22 with comprehensive actuarial, contractual, or surveyor assessments. In event of partial rejection or arbitrary undervaluation, file a Company Application under Rule 118 of the Companies (Winding Up) Rules within 21 days appealing the Liquidator's decision before the Company Court or NCLT.

Section 323 All 470 Sections of Companies Act Section 325