Where a company is being wound up, a floating charge on the undertaking or property of the company created within the twelve months immediately preceding the commencement of the winding up, shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except for the amount of any cash paid to the company at the time of, or subsequent to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of five per cent.
per annum or such other rate as may be notified by the Central Government in this behalf.
Legal Commentary & Landmark Judgments: Section 332
Section 332 of the Companies Act, 2013 invalidates any floating charge on the company's undertaking or property created within twelve months preceding the commencement of winding up, unless the company is proved to have been solvent immediately after its creation, preserving only contemporaneous or subsequent cash advances.
In defending against a debenture-holder or lender claiming under a floating charge created within 12 months of winding up, challenge the charge under Section 332. Demand production of cash books and bank statements proving solvency on the date of execution. If the lender cannot establish immediate solvency, the charge is extinguished save for genuine contemporaneous cash advances.