1. Where a company is being wound up and anything made, taken or done after the commencement of this Act is invalid under section 328 as a fraudulent preference of a person interested in property mortgaged or charged to secure the company's debt, then, without prejudice to any rights or liabilities arising, apart from this provision, the person preferred shall be subject to the same liabilities, and shall have the same rights, as if he had undertaken to be personally liable as a surety for the debt, to the extent of the mortgage or charge on the property or the value of his interest, whichever is less.
2. The value of the interest of the person preferred under sub-section (1 ) shall be determined as at the date of the transaction constituting the fraudulent preference, as if the interest were free of all encumbrances other than those to which the mortgage or charge for the debt of the company was then subject.
3. On an application made to the Tribunal with respect to any payment on the ground that the payment was a fraudulent preference of a surety or guarantor, the Tribunal shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor and to grant relief in respect thereof, notwithstanding that it is not necessary so to do for the purposes of the winding up, and for that purpose, may give leave to bring in the surety or guarantor as a third party as in the case of a suit for the recovery of the sum paid.
4. The provisions of sub-section (3 ) shall apply mutatis mutandis in relation to transactions other than payment of money.
Legal Commentary & Landmark Judgments: Section 331
Section 331 of the Companies Act, 2013 defines the liabilities and rights of persons who were fraudulently preferred as sureties or guarantors, subjecting them to personal liability as principal debtors and providing an indemnity mechanism against the preferred creditor.
When petitioning the Tribunal under Section 331, implead both the primary bank/creditor and the personal guarantor whose exposure was liquidated. Seek an order reviving the guarantee or establishing personal liability against the surety up to the exact quantum of corporate funds dissipated to extinguish the personal security.