Section 329: Transfers not in good faith to be void
Companies Act • Official Statutory Text & Practice Guide
Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 2013
Section 329 of Companies Act: Corporate Governance & Statutory Compliance
Official Bare Act Text
Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary
Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrance in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by the Tribunal or the passing of a resolution for voluntary winding up of the company, shall be void against the Company Liquidator.
Statutory Defined Terms in this Section:(Click any term for official legal definition)
Section 329 of the Companies Act, 2013 declares void against the Company Liquidator any transfer of movable or immovable property or delivery of goods made within one year prior to the presentation of a winding up petition, unless executed in the ordinary course of business or in good faith for valuable consideration.
One-Year Statutory Vulnerability Period: Covers all alienations, sales, transfers, and asset disposals consummated within twelve months preceding the presentation of the winding up petition.
Presumption of Avoidance: Establishes a statutory presumption of invalidity against the Company Liquidator, placing the evidential burden on the transferee to substantiate legitimacy.
Dual Statutory Exemptions: The transaction is saved only if the transferee affirmatively proves: (a) it was conducted in the ordinary course of the company's business; or (b) it was made in good faith and for valuable, fair-market consideration.
Key Landmark Precedents:
N. Subramania Iyer v. Official Receiver, AIR 1958 SC 1: The Supreme Court held that the burden of proving good faith and valuable consideration lies squarely on the transferee seeking protection against avoidance in liquidation proceedings.
Monark Enterprises v. Kishan Chand Chellaram, (1984) 56 Comp Cas 88 (Bom): Held that transfer of immovable property by an insolvent company to satisfy an antecedent debt does not fall within the 'ordinary course of business' unless the transferee proves genuine bona fide urgency and fair market equivalence.
Official Liquidator v. Sri Krishna Deo, AIR 1959 All 247: Clarified that 'valuable consideration' requires genuine economic reciprocity; nominal consideration or gross undervaluation establishes lack of good faith by necessary implication.
Courtroom Practice & Strategic Litigation Guidance:
When filing an avoidance application under Section 329, the Liquidator must establish the presentation date of the winding up petition and the transfer deed execution within 12 months. Transferees defending the alienation must produce independent registered valuer reports and banking trails evidencing contemporaneous consideration to satisfy the dual burden of good faith and commercial value.
Legal Commentary & Landmark Judgments: Section 329
Section 329 of the Companies Act, 2013 declares void against the Company Liquidator any transfer of movable or immovable property or delivery of goods made within one year prior to the presentation of a winding up petition, unless executed in the ordinary course of business or in good faith for valuable consideration.
When filing an avoidance application under Section 329, the Liquidator must establish the presentation date of the winding up petition and the transfer deed execution within 12 months. Transferees defending the alienation must produce independent registered valuer reports and banking trails evidencing contemporaneous consideration to satisfy the dual burden of good faith and commercial value.